Covenant and Rule Enforcement
By Todd R. Iliff, Esq.
Sooner or later virtually every community association must enforce the restrictive covenants including the rules and regulations. By using some time tested techniques and by understanding the applicable law, an association can accomplish this task with a minimum outlay of time, money and effort.
RESTRICTIVE COVENANTS IN GENERAL
Restrictive covenants and rules are designed to set minimum standards to be met by association members. Compliance creates a uniform living environment for the owners living in a community association. Because not every owner always complies, associations must be prepared to take enforcement action.
Restrictive covenant and rule enforcement raises a number of legal issues to be addressed by the association. For example, what authority does the association have for enforcing the covenant or rule? Typically, the either association's governing documents (declaration, bylaws, or rules and regulations) or statutes, such as the Minnesota Common Interest Ownership Act (MCIOA), provide the necessary authority.
The next issue is whether the association member has truly violated the rule or covenant? The answer to this question comes from a review of the applicable facts on whether the conduct of a member has indeed run afoul of the covenant or rule. For example, is a licensed day care operation a violation of a covenant indicating that the property may be used for "residential" purposes only? Isn’t caring for children a residential use?
Next, the association needs to determine whether enforcement of the restrictive covenant against the association member is fair and reasonable. The association must follow the proper procedures set forth in its governing documents in order to enforce its restrictive covenants. Generally, associations must comply with the following procedures:
- Notice: this procedure provides the offending member that his conduct is in violation of a covenant or rule of which the member had actual or implied notice. As a practical matter, this notice may be the only action necessary by the association where the member was simply unaware that his conduct violated the restrictive covenant;
- Hearing or opportunity to be heard: this procedure allows the member an opportunity to be heard before the association's Board of Directors or applicable committee;
- Notice of Decision: this procedure provides a definitive ruling on the members conduct with relation to the rule or covenant. Notice of the decision may also deter further violations of the rule or covenant by other association members;
TYPES OF RESTRICTIVE COVENANTS
Age restrictive covenants usually restrict occupancy of units within the association to persons of a specific age. For example, the governing documents may restrict occupancy to persons 18 years old or older. These restrictions are enforceable, but only under very limited circumstances. The Fair Housing Amendments Act and the Minnesota Human Rights Act prohibit "discrimination" based on age unless certain rigid criteria are first met by the association.
Leasing restrictions limit the ability of owners to lease their unit(s). The purpose of this type of covenant is to keep the association from taking on the characteristics of an apartment or rental community. It is generally believed that owner occupants take better care of their surroundings than do renters. Leasing restrictions are generally enforceable because the association has a recognized interest in the environment of the community. Caution is warranted to avoid any discrimination in rules or enforcement.
Architectural control restrictions protect the appearance of the exteriors of the buildings within the community association. Examples of these restrictive covenants are covenants limiting the building of fences and other structures, restricting the color of buildings or the color and type of roofing materials and prohibiting additions to the exteriors of units. These covenants are generally enforceable. However, there are exceptions. For example, federal law (the Telecommunications Act and FCC Regulations) limits the enforcement of restrictive covenants regarding satellite dishes less than one meter in diameter. Inconsistent enforcement can be an impediment to enforcing architectural control restrictions. If the association prohibits member A from building a fence, then the association must also enforce the same restriction against member B and other members of the association.
Pet restrictions are used by associations to govern the ownership and control of pets. These restrictions arise from the association's interest in the environment, appearance and safety of the properties within the community. Therefore, pet restrictions are generally enforceable. They are however, some of the most difficult to enforce without resorting to legal action, due the emotional attachment of people to their pets. Also, federal and state laws limit the enforcement of no-pet covenants or rules where a unit owner or occupant is "disabled." Recently, there has been a marked trend whereby residents in community associations that restrict pets will obtain letters from their doctors stating that the person is "disabled" and needs a pet to accommodate the disability (this topic is the subject of its own extensive article). An association is obligated to provide a "reasonable accommodation" in these circumstances and allow the owner to keep a pet, if the owner is truly "disabled." These requests require special handling and often the assistance of counsel. Great caution in handling these situations is advised.
Covenants restricting business use are often areas of dispute because associations have legitimate concerns over owners conduct business from their units. The usual reasons for restricting business use are that such business use would increase traffic in the community and such usage would increase the potential liability to the association for non-members on the association grounds. The enforceability of business use restrictions depends upon the specific language of the association's governing documents.
The enforcement of business use restrictions is often cited to prohibit activities such as day care facilities. The ability to enforce such restrictions depends on the specific language in the association's governing documents. There are two lines of case law in this area: The first line involves cases where the association is seeking enforcement of a "residential use" restriction to prohibit the “business” activity. The second involves cases where the association is seeking enforcement of a no "business use" restriction to prohibit the business.
In general, courts have determined that the phrase "residential use" in a residential use restriction means that such use must be consistent with the normal use of a residence. The caring of children may be a use that is normal or incidental for a residence; however, conducting a business is not necessarily incidental to the use of a residence. Therefore, the courts have given mixed rulings on such issues as whether a day care facility violates an association's restrictive covenant that limits association units to "residential use."
Courts generally summarize a “no business use” restrictive covenant as one which strictly prohibits the operation of any trade or business within the community or from the unit. Courts have recognized for example, that day care facilities are a business. Courts will generally enforce the business use restriction by not allowing an activity that is determined to be a business to operate within the community.
LEGAL PROCEEDINGS TO ENFORCE COVENANT VIOLATIONS
The option of legal proceedings to enforce covenants and rules should only be chosen after careful consideration by the Board upon the advice of legal counsel and management. The decision to initiate legal proceedings involves many issues that should be carefully considered by the Board, such as:
- Can the association financially afford this type of action in response to a violation of rules and regulations?;
- Are the staff members, officers, and directors prepared for the demands that litigation may place on their time?;
- Is the association aware of the length of time it may take to obtain the recovery through legal proceedings?;
- Is the Board aware of the probability and magnitude of a possible recovery on the violation of the covenant at issue?;
- How likely is it that the association will prevail and will it recover its expenditures?; and
- Does the Board really have a choice?
Legal proceedings through the court system are generally initiated to seek two major remedies:
rules to reimburse the association for costs incurred by the violation, to penalize the violation (e.g. collection of fines), and to discourage further violations. Monetary relief may be sought to collect fines imposed for violations of covenants, or as a penalty for the violation itself.
Restraining Orders and Injunctions. A temporary restraining order may be used to stop a violation until the court has had ample time to consider the matter. This measure is generally sought in “emergency” or urgent situations. The association must show that it has a strong likelihood of succeeding in the case and it will suffer a significant harm (not compensable in money) if the violating member is allowed to continue to violate the rule or regulation. A preliminary injunction acts like a temporary restraining order. However, seeking of a preliminary injunction does not necessarily require an emergency situation. A permanent injunction is issued at the conclusion of the trial on the merits of the case. A permanent injunction forever prohibits the losing party from continuing the action which was the subject of the lawsuit. Generally, an association may recover the costs of seeking the restraining order or injunction including attorney’s fees, but this is ultimately up to the court.
An example would be a suit for an injunction to stop a member who is building a fence in violation of rules and regulations; upon the granting of the injunction by the court to the association, the member would be required to remove the fence, which was found to be in violation.