“Conceivably, every restriction, and any amendment, could impact the sale of properties or their resale value ,” said Vollmer. The argument is whether that effect is a positive or negative one. “Public policy favors these restrictions because, at their core, they are intended to uphold and enhance the value of property. It is presumed purchasers reviewed these restrictions and decided to purchase the property based upon that scheme,” he said.
Restrictions provide the stability of maintaining things that residents don’t want changed. The premise of the entire restrictive property scheme is that the rules are desired by the people who will buy the property and are designed to uphold a certain desired community standard. Given this premise, Vollmer explained, it’s difficult to argue that the restriction actually hurts the value of the property.
Classic examples of restrictions that could come into question here would be pet policies and leasing restrictions. Vollmer stated, “If pets are banned, you are arguably reducing the number of potential purchasers. If leasing is banned or restricted, it is possible that investors will be turned off from purchasing within the project.”
However, do either of these things devalue the property or increase the value of the property?
“It depends on the desires of the prospective purchaser,” he said. Certainly these types of restrictions limit the number of people who may buy in a particular community. But those who do buy do so knowing about and even desiring the restriction. So then it represents a value. For example, someone purchasing in a community that restricts leasing may desire that community because all the units are owner-occupied. Another example is a buyer who doesn’t want to deal with a neighbor’s barking dog — a community’s no pet policy would be a plus to that buyer.
“It can be challenging for associations to determine whether the increased interest from those looking to have the restriction in place will offset decreased interest from those adversely affected by the restriction,” he said.
Architectural controls are those with respect to the maintenance or construction of exterior improvements of the community. They address any new construction or any reconstruction or updates, alterations or modifications to exteriors of buildings.
What is reasonable is largely what is written in the original documents or amended in the original documents in accordance with the requirements of the particular document. “The Condominium Act prohibits changes in the exterior appearance of the unit or in other portions of the condominium project, subject to the terms of the condominium documents. The architectural controls in HOA’s are solely dependent on the restrictions drafted by the developer,” said Vollmer . He explained that you can generally write anything as a developer’s attorney regarding those restrictions, as long as you don’t violate any other legal concepts. “For example,” he said, “requiring that purchasers only hire one specific builder or the developer to construct buildings is likely to be viewed as unreasonable.”
Pretty much any type of architectural control that doesn’t violate other laws will be considered reasonable since the restriction is being placed upon the property prior to it being purchased. Thus, the buyer has knowledge of the restriction prior to the purchase of the property. “Reasonable architectural control restrictions are going to be upheld regardless of whether the purchaser read them or not,” said Vollmer.
Can associations require that renovation work be permitted and contractors need to be licensed and insured?
Associations can require contractors to be licensed and insured. However, Vollmer points out, “To the extent that the work does not require prior approval, owners have the right to pull permits and perform their own work.” You can’t have a provision that prevents a homeowner from pulling their own permits and doing the modifications when the city allows it. “Such a restriction is likely to be deemed unreasonable,” he said.
According to Vollmer, in most cases, yes. “Elaborate play-sets may be designed with a concrete base or other attachment to the land. In those instances, they could be deemed permanent structures. The best way to avoid this debate is to have a restriction specifically addressing play-sets, regardless of whether they are temporary or permanent in nature,” he said.
Can associations restrict or prohibit the installation of energy efficient systems for aesthetic reasons?
“In Michigan, currently, you can,” Vollmer said. “However, it’s possible some government rules will be forthcoming which prevent associations from restricting ‘green’ improvements if they meet certain standards and comply with applicable codes ,” he said. There are still associations doing that and also amending their documents to restrict solar energy panels on roofs for aesthetic reasons. “Prohibiting solar panels remains entirely permissible in Michigan,” he said.
Under certain limited conditions, if the association’s documents allow it, they can grant a variance. “The criteria for granting a variance should be rigid, and similar in nature to the objective criteria used by municipalities in granting variances to their zoning ordinances. Just because the applicant is a neighbor, or because he or she voted for you in the last election, does not justify a variance. Steer clear of those subjective standards in deciding whether to make an exception to the restriction,” said Vollmer . Those objective standards must include, at a minimum, that the reason for the variance is not self-created by the person requesting that variance. If it is, granting the variance would be an arbitrary or capricious act and therefore could be deemed unenforceable in a court of law, according to Vollmer.
An encroachment in a common area is when somebody erects something or takes action in an area that is commonly-owned by the association. According to Vollmer, in a well-documented community there is usually a self-help provision to take action to reduce encroachment violations. In these situations, you’d send a notice for the violator to remove the encroachment, specifying that if it’s not removed it will be taken away by the association’s maintenance crew at the cost of the offender.
In the most severe cases, a resident could have encroached on a common area for such a lengthy period of time that they may say that they now own that area individually by adverse possession. “If those claims are raised ,” said Vollmer , “you are going to need to take this court to resolve the dispute.” Of course, it is difficult to imagine residents could take commonly-owned property and possess it individually. However, Vollmer noted that in a severe situation, an association may need to get a court judgment quieting title. When these issues are long standing, they become more costly because they require litigation to sort out.
Can an association be held responsible in a situation where there was insufficient lighting caused by lighting restrictions?
According to Vollmer, yes. “If the association creates a hazardous condition there could be liability for the consequences of that condition,” he said. This statement applies to much more than a lack of lighting. Vollmer explained that in some ways, if you don’t attempt to do something, you’re better off than when you attempt to do something and don’t do it well enough. Essentially, if the association is altering the natural state of the environment and does it in a way that creates or exacerbates a hazard, the association will be liable for the situation they have created. “The board has a fiduciary obligation to consult with professionals qualified in developing a security lighting proposal, if that is the intent of the lighting. The proposal should be implemented under the oversight o the lighting professional. Doing these things will help reduce exposure to liability ,” he said. If the association decides where light is needed on its own, and then creates an area that in unprotected in comparison to areas they are protecting, the association has then created a hazard. Any time an association is creating modifications for safety they should get an expert’s opinion, and follow it. This minimizes any potential liability.
“Not in the same way police issue speeding tickets ,” said Vollmer. Associations don’t have police power in the traditional sense. Instead, they can impose fines or penalties through their fining power for what essentially are violations of the condominium documents of which the rules and regulations are a part. “It is reasonable for the board to adopt a rule imposing a speed limit,” he said, “and if the speed limit has been posted and the rules published, the board can levy fines.” The difficulty you run into, he noted, is giving tickets to people who are not co-owners. “Can you determine who the guest was visiting the community? Ultimately, the right to levy fines extends to the owner,” he said. For guests or invitees who speed, you would need to issue the fine to the co-owner they are visiting. Ticketing those guests directly can only be done by a police officer.
Guerra stressed that when putting together restrictions and rules on holiday displays, associations need to be holiday neutral. “You should not be referencing specific holidays in the rules. The desire to limit ‘Christmas’ lights from after Thanksgiving until after New Year’s improperly differentiates between Christian and non-Christian holidays,” said Vollmer. He noted that you can’t choose certain holidays to name in the rules. You need to have rules for what would be allowed for any holiday. “It is alright to specify time periods by which decorations are permitted for holidays, so long as you do not identify those holidays based on religion,” he said.
Holidays that happen in locations with heavy winters can be treated differently than holidays in mild weather. “Weather could play a factor in extending the time for how long holiday decorations might be allowed to stay up. It is reasonable to give owners more time to remove decorations during the winter on account of the poor weather conditions, so long as that extension is not holiday specific,” he said.
According to Vollmer, there are certain types of signage that are going to be a little more problematic than others. However, the bottom line is that in a private community such as a condominium situation, where there is commonly-owned property, associations have the right to restrict. Alternatively, in individually-owned property, such as in HOAs — that will become significantly more difficult because there are court decisions out there that do not even allow municipalities to tell somebody they can’t have a political sign on their front lawn. “If a municipality cannot adopt an ordinance restricting political signs, can a community association? Maybe – but this is a situation where the restriction could be challenged on the basis it is unreasonable or against public policy ,” he said.