Community associations with unenforced deed restrictions can enforce them – even after 82 years! So says a Morris County Superior Court Judge after a recent trial in a case entitled Unfair Share Lake Arrowhead 2010, Inc. v. Lake Arrowhead Club, Inc.
While the association in this case was a precursor to the modern community association and did not have a declaration of covenants, conditions, and restrictions, the deed to each of its 242 homes included an easement granting "the rights to use Lake Arrowhead and roads" subject to rules and regulations created by Lake Arrowhead Club, Inc. ("Association"). The Association, which was created in 1927, was obligated to maintain roads, parks, a clubhouse, tennis courts, and other property. For 82 years, membership and payment of assessments was treated as voluntary which resulted in homeowners separating into two groups: club members (who paid annual assessments and used the lake, recreational facilities, and roadways) and non-club members (who did not pay annual assessments, did not use the lake or recreational facilities but still used the roadways). These voluntary assessments were the Association’s only revenue until 2009. In 2009, the Association imposed an assessment of $324 per year on all 242 homes; those homeowners who chose to join the club to use the recreational facilities were required to pay an additional fee as well. The 2009 assessment led 73 community members, who paid an assessment, to file litigation seeking to have the deed restriction terminated because it had never been enforced against them.
First, the court determined that the plaintiff made two key procedural errors: (1) the plaintiff, a corporation formed by the 73 homeowners had no standing and (2) the case should have been brought as a declaratory judgment action, not a quiet title action. Notwithstanding this, the court went beyond these issues to make a determination on the merits of the case.
The court held that the Association did not abandon, relinquish, waive or give up its rights under the easement. The easement allowed homeowners to use the lake and roads subject to the Association rules and regulations. While the Association made it a rule from the outset that only club members would pay assessments to maintain the lake, roads and other property, the Association had the right to change that rule to impose assessments on all homes in the community. In other words, the Association "did not abandon its right [to impose assessments], but chose to exercise that right in a different fashion." The court cited the settled principle of easement law that "mere non-use of an easement will not suffice to destroy the right." In order to constitute an abandonment of an easement, the facts must clearly establish an intention to abandon by clear and convincing proof. The court found none in this case.
This case was a positive outcome for community associations but reinforces the need for diligence in knowing about and enforcing easements and other deed restrictions. While restrictions that are clearly set forth in a declaration or master deed will be more easily enforced than the easement in this case, all community association managers and board members must still be mindful of them. If your community association has any concerns about its deed restrictions, we would be happy to assist you in evaluating your obligations.