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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.” Each homeowner in this case needed to consent to be a member of DVCC, a nonprofit corporation. Although such consent can arise by a property owner accepting a deed restriction,  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.”  The amendment requiring membership in and payments to DVCC thus “markedly changed the obligations of the implicated lot owners.”  In finding in favor of the homeowners, the Court said:  “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.

 

Posted On: 3/24/2010