Dreamland Villa Community Club, Inc. v. Raimey – 3/16/2010
Arizona Court of Appeals Division One Holds That Deed Restrictions for a Community with No Common Areas May Not Be Amended By Majority Vote to Require Membership in a New Homeowners’ Association When No Similar Covenant Existed Before.
Dreamland Villa is a residential community with eighteen sections, each of which is governed by its own set of deed restrictions. The deed restrictions provide that they may be amended “in whole or in part or revoked in their entirety by a vote of the owners of a majority of the lots.” Dreamland Villa has no common areas. Dreamland Villa Community Club, Inc. (“DVCC”) is a separate nonprofit corporation organized to provide recreational facilities and plan activities for club members. After a vote of Dreamland Villa homeowners, DVCC recorded new deed restrictions for each section, essentially making all Dreamland Villa residents members of DVCC, and requiring each lot owner to pay annual and special assessments levied by DVCC.
DVCC sued some homeowners for failing to pay assessments, and the homeowners counterclaimed. On cross motions for summary judgment, the trial court ruled in favor of DVCC, concluding that the homeowners had impliedly consented to the amendment by purchasing lots with restrictions that allowed amendment by majority vote of homeowners.
The Court of Appeals reversed. As the Court explained, A.R.S. § 10-3601(B) addresses admission of members to a nonprofit corporation such as DVCC and provides that “[n]o person shall be admitted as a member without that person’s consent. Consent may be express or implied.” Thus, each homeowner, in this case, needed to consent to be a member of DVCC, a nonprofit corporation. Such consent may arise when a property owner accepts a deed restriction allowing future amendment of the restrictions.
The Court of Appeals had previously held that “mandatory membership in a new homeowners’ association can only be imposed on owners of lots within an existing subdivision by recording deed restrictions to that effect.” Shamrock v. Wagon Wheel Park Homeowners Ass’n, 206 Ariz. 42, 43 ¶ 1, 75 P.3d 132, 133 (App. 2003). Shamrock held that amending and recording an association’s bylaws did not make membership in an association mandatory, but “did not ultimately determine whether and in what circumstances membership in an association could be imposed after the declaration of restrictions was amended to provide for such membership.” (Emphasis added.)
In this case, the Court found it “noteworthy that there were no common areas within Dreamland Villa” and that the original “restrictive covenants pertain[ed] [only] to each lot owner’s personal residence.” In finding in favor of the homeowners, the Court relied on other cases that distinguished between amendments for which owners would be put on notice, for instance, because the development shared common areas, and those imposing “substantial and unforeseeable” impacts on owners. Because the original developments, in this case, did not share common areas, the amendment requiring membership in and payments to DVCC “markedly changed the obligations of the implicated lot owners.” In short, the Court concluded, “it is not reasonable to use the amendment provision to direct that one group of lot owners may, in effect, take the property of another group in order to fund activities that do not universally benefit each homeowner’s property or areas owner in common by all.”
Judge Thompson authored the opinion; Judges Barker and Timmer concurred