Appellate court affirms forced sale of condo unit

Mollie Pawlosky Iowa Commercial Litigation Dickinson Law Des Moines, Iowa

Posted on 09/15/2016 at 12:00 AM by Mollie Pawlosky

Charles Ray owned a condominium unit at Pheasant Hills Condos.  The evidence submitted during the trial of Pheasant Hills Eldridge Condo. Owners and Facilities Ass’n v. Ray, No. 15-0587 (Ia. Ct. App. Aug. 31, 2016) showed that Ray engaged in several actions which did not please the other condo owners, some of which actions—like stealing mail and possessing a cache of firearms as a felon--were criminal.

Bylaws of the Pheasant Hills homeowners’ association regulated owner conduct. One of the bylaw amendments authorized involuntary sale of a unit if an owner “violate[d] any of the covenants or restrictions or provisions of this Declaration, the By-laws or the regulations adopted by the Association.”

The association sent Ray notices of bylaw violations, with limited success. Eventually, the association sent Ray a thirty-day notice to cure the violations and, when not cured, served him with a ten-day notice to terminate his ownership rights. The association then sought a court order requiring Ray to sell his unit. Following a bench trial, the district court entered an injunction, terminating Ray’s interest in the property, ordering a sale of the unit, and enjoining Ray from reacquiring his interest. Ray appealed.

Although Ray argued that the association did not have a copy of the notice given for the meeting where the forced sale amendment was approved, the Court of Appeals held that substantial evidence supported the district court’s finding to the contrary. The bylaw amendment, filed with the Scott County Recorder in 2001, stated it was passed following “notice to said owners and directors specifically called for the purpose of considering the amendments to the By-Laws.” Ray submitted no evidence that the notice was deficient.

As to Ray’s argument that the bylaws did not clearly prohibit Ray’s behavior, the Court of Appeals stated verbatim the, “Restrictions on Use of Apartments,” containing eight specific restrictions that restricted unit owners. The appellate court held that even if, “immoral, improper or offensive,” conduct was ambiguous, most of Ray’s conduct fell within the clear and unambiguous prohibition on engaging in, “unlawful,” conduct. Moreover, the business judgment rule required that the court defer to the association’s interpretation of the bylaws, because there was no showing of self-dealing or conflict of interest in interpreting the restrictions. The association reasonably interpreted and applied its bylaws in deciding to seek an involuntary sale of Ray’s condominium unit.

The condo association was able to obtain its desired remedy, because it had properly laid the groundwork in amending the association’s bylaws regarding forced sales, and by making sure that the bylaws were specific in limiting restrictions on use.  For further information regarding Pheasant Hills Eldridge Condo. Owners and Facilities Ass’n v. Ray, or general commercial litigation, contact Mollie Pawlosky.

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