Covenants on homeowners in PUD are lawful and binding

by Gary Taylor

Wheeler v. Southport Seven PUD
(North Dakota Supreme Court, September 28, 2012)

In August 1997, the Southport Development Limited Liability Company filed an amended declaration for the Southport Development PUD Project I in south Bismarck.  The amended declaration states “[n]o portion of the subject project may be removed from the project by vacation or partition, except by the unanimous consent of all record title owners of all of the PUD lots and the holders of all mortgages which constitute mortgage liens upon the subject PUD lots and tracts.” The amended declaration also provides for a Southport association of owners, with each unit owner deemed a member of the association.

In September 2005, Wheeler purchased a home in Southport by warranty deed.   In 2005 and 2006, Wheeler paid Southport fees, dues, and assessments, including fees for snow removal and lawn care. Wheeler, however, was not satisfied with either the snow removal or the lawn care provided by Southport, and in about 2006, she sent a letter to the Southport association, indicating she no longer wanted, and would not pay for, snow removal or lawn care. Wheeler paid for snow removal on one occasion in 2007. In 2007, the Southport association initially filed a lien against Wheeler’s property for unpaid assessments, but later withdrew the lien because of a failure to send notice to Wheeler by certified mail. In 2008, Southport filed another lien on her property after notice was given by certified mail. That lien later was released when Wheeler paid funds into escrow.  In 2009, Wheeler commenced this action against Southport seeking relief from the imposition of dues, fines, and liens filed by Southport against her property and seeking damages for slander to title. Southport answered and counterclaimed for unpaid assessments. The district court ruled that Wheeler was obligated to pay assessments set by the association because her lot was within Southport PUD Project I and awarded Southport a judgment for $2,124.22. Wheeler appealed.

The North Dakota Supreme Court observed that a planned unit development or PUD is a specialized form of zoning ordinance.  Although zoning ordinances are not the same as restrictive covenants running with the land and binding subsequent purchasers, the court explained there is little real difference:

A covenant is a contract and an ordinance isn’t–though a PUD is very close to being a covenant because . . . it is the product of a deal between a developer and a municipality. No matter; a zoning ordinance has the same effect as a covenant because, unless worded to bind only the current owner, it limits the use of the land by whoever owns it, not just whoever owned it when the ordinance was enacted. . . . [A] zoning variance creates a restriction that runs with the land, just like a covenant; and there is no relevant difference between a variance and a PUD.

“As a matter of law, covenants for payment of annual assessments for operation of property owners associations are covenants running with the land,” which “may be enforced by subsequent assignees or successors in title to the original parties.” Deed restrictions and covenants are vital to the existence and viability of PUDs, and “if clearly established by proper instruments, are favored by definite public policy.”  The Court ruled that Wheeler could not opt out of payment of Southport’s annual assessments.  The Court also dismissed Wheeler’s claim that the amended declaration is a “contract of adhesion and contains oppressive and unconscionable terms, and that, as interpreted by the association and the district court, there is no enforcement of the duty on the part of Southport to provide any services.”  The Court reiterated that Wheeler’s obligations to Southport are imposed by the covenants running with the land and she is bound by the amended declaration’s relevant provisions by the purchase of her property within the development.

Village’s extraterritorial zoning valid and applicable to condominium development

by Kaitlin Heinen

Village of Newburg v. Deerprint Enterprises, LLC
(Wisconsin Court of Appeals, August 15, 2012)

Deerprint Enterprises, LLC filed a motion for summary judgment seeking declaration that its condominium plat the Town of Trenton approved in 2007 is not subject to the Village of Newburg’s extraterritorial plat approval ordinances. The Village also filed a motion for summary judgment seeking declaration that the Town’s earlier approval is void, so as to require that Deerprint’s development be reapproved. The circuit court granted the Village’s motion and denied Deerprint’s.

The case was previously before the Court of Appeals on a related question.  Deerprint proposed a 6-unit condominium that sits on a 35-acre parcel of land zoned as CES-5 Country Estates under the Town’s zoning ordinance. This zoning allows one single-family unit per a minimum of 5 acres in a residential development; however one of the condominium units was initially commercial. The Village objected to the Town’s approval of the mixed-use development, designated as a Planned Development Overlay (PDO) and sought a declaration that it was invalid under the Village’s extraterritorial zoning authority that was in place at the time. The Wisconsin Court of Appeals agreed and remanded the case to the trial court.

On remand, the trial court held the Town’s approval was null and void and granted the Village’s motion for a summary judgment. Deerprint then simply amended their condominium declaration to make all units residential. The Village objected, arguing that no valid condominium plat existed that could be amended, since the Town’s approval had since been invalidated, and was never re-submitted to the Village for approval. The trial court found that amending the rejected declaration was insufficient and granted the Village’s request for summary judgment. Deerprint appealed again, or as Judge Todd K. Martens cleverly remarked, Deerprint “essentially [tried] for a second kick at the same old cat.”

Deerprint argued that the circuit court erred in that neither the Town nor the Village can prohibit the condominium form of ownership according to WIS. STAT. §703.27(1), but the Wisconsin Court of Appeals disagreed. The trial court did not require Deerprint to get approval for condominium ownership but to be approved for a multi-family residential development on land zoned for single-family residence per five acres. Additionally, WIS. STAT. §703.27(1) does not exempt condominiums from zoning regulations. Rezoning via another PDO is required then since the first PDO designation was invalidated.

WIS. STAT. §703.27(1) “(1) prohibits zoning ordinances from either outlawing the condominium form of ownership or imposing on condominiums requirements not imposed on other forms of ownership; and (2) requires a municipality to pass an ordinance if it wants to apply subdivision ordinances to condominiums.”  WIS. STAT. §236.10(1)(b) requires approval by both the town and the governing municipality for the property within the overall jurisdiction of both. The Village’s extraterritorial plat approval encompasses the condominium plat by VILLAGE OF NEWBURG,WIS., ORDINANCES ch. 18, § 18.04(6)(b) (2007), which expressly states that platting regulations are applicable to condominiums. Also, WIS. STAT. §236.45 authorizes a municipality to regulate subdivisions, which are applicable outside city and village boundaries. And WIS. STAT. § 703.27(1) authorizes the inclusion of condominiums under these regulations. Since the Village’s ordinance expressly refers to condominiums, it is applicable to Deerprint’s parcel.

The Court held that all zoning provisions have to be met for a condominium to be valid. Deerprint’s parcel clearly lies within the Village’s jurisdiction, and Deerprint has never sought approval from the Village. So the judgment of the circuit court was affirmed.

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