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__The analysis indicates that the answer is NO. The consequence of this conclusion is that, since the unpaid dues and assessments are not personal, there is no personal debt that can be collected in the courts. The unpaid dues and assessments are a lien against the property and can be collected by foreclosure.
__The continuation of this post provides an analysis of the considerations related to the question.
Don Nordeen
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Please be advised that the writer is not an attorney, and this is not legal advice. The information is based on research on information available in the public domain.
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Click Continue for Post Continuation plus Comments.
Please be advised that the writer is not an attorney, and this is not legal advice. The information is based on research on information available in the public domain.
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- Key Words:xx• Attorney Issues, • Governing Documents, General, • MOA Members & Members' Rights
Are delinquent dues & assessments a personal debt? (continued)
Introduction
__While the dues and assessments in a Common Interest Development have to be paid by a person (broad legal definition of person applies), the dues and assessments are typically assessed against property units. Further, the provisions regarding dues and assessments are defined in the Declaration of Covenants, Conditions and Restrictions (“DMCCR”) which run with the land.
__Unpaid dues and assessments become a lien against the property unit. See DMCCR, Article V, Section 5. If the unpaid dues and assessments were treated as personal debt of the owner, then the owner would be liable for unpaid dues and assessments after the property is conveyed to another party. But such is not the case since the unpaid dues and assessments remain a lien on the property to be paid by the new owner if the lien isn't paid and extinguished prior to sale, or extinguished by a foreclosure.
__Consequently, since unpaid dues and assessments are not a personal debt, they are likely not collectible as personal debt in court.
Definition and Meaning of Restrictive Covenants and Related Terms
__A collection of definitions for Restrictive Covenants, Covenants, Conditions and Restrictions (CC&Rs), and related terms is available in FindLaw (CC&Rs). Links are provided in the second section of the main column and in the right column.
__Two cases which opine that covenants which "run with the land" are "not personal" are:
- Candlewood Lake Assn., Inc. v. Scott, 2001-Ohio-8873 [URL is <http://www.sconet.state.oh.us/rod/docs/pdf/10/2001/2001-ohio-8873.pdf>.] — Separately search for "not personal" and "with the land". The entire paragraph describes the covenants in question which are similar to those for Michaywé. The important quotation is:
"Similarly, the covenants at issue, as the covenants in Peto, are covenants that run with the land, not personal covenants. First, the deed restrictions affirmatively state a clear intention that "[t]he Restrictions shall run with the land and shall be binding upon the Association and upon all parties ('Owners') having or acquiring any right, title or interest in the real property or any part thereof." (Paragraph 203 of deed restrictions; emphasis added.) See, also, paragraph 905 ("The foregoing covenants and restrictions shall run with the land and shall be binding on all parties and all persons claiming under them ***"). Similar language in a "Membership Covenant" in the by-laws of a resort property association has been held to constitute a covenant running with the land. See Rome Rock Assoc., Inc. v. Warsing (Dec. 23, 1999), Ashtabula App. No. 98-A-0051, unreported ("This covenant concerning said real estate and the enjoyment, use and benefit thereof shall be deemed to run with the land and non-payment of the annual charges shall be a lien thereon")." [Bold and underline emphasis added]
- Tri-State Sand & Gravel, L.L.C. v. Cox, No. 38,217-CA, COURT OF APPEAL OF LOUISIANA, SECOND CIRCUIT, April 7, 2004, Judgment Rendered [URL is <http://www.lacoa2.org/Opinions%20PDF/38217ca.pdf>.] — Search for "not personal". The important quotation is:
"This Court has since consistently held that building restrictions “constitute real rights, not personal to the vendor, and inure to the benefit of all other grantees under a general plan of development, and are real rights running with the land; and that the remedy of the other grantees to prevent a violation of the restrictions by another is by injunction.”" [Bold and underline emphasis added]
"Running With the Land: A restriction on the use of property which remains binding on that property, no matter who owns it. In Arizona, this is most commonly seen in deed restrictions, also known as CC&Rs. When a neighborhood is built with deed restrictions, anybody who buys or sells property in that neighborhood must buy or sell it subject to those restrictions, since they are attached to the land and are not personal to the seller." [Bold and underline emphasis added]__The requirement of not being personal is also stated in cases involving easements. The landmark Michigan Supreme Court, which described the process in Sanborn v McLean, 233 Mich 227, 229-230; 206 NW 496 (1925): [See summary of Sanborn v. McLean [URL is <http://www.audiocasefiles.com/acf_cases/9499-sanborn-v-mclean>.].
"If the owner of two or more lots, so situated as to bear the relation, sells one with restrictions of benefit to the land retained, the servitude becomes mutual, and, during the period of restraint, the owner of the lot or lots retained can do nothing forbidden to the owner of the lot sold. For want of a better descriptive term this is styled a reciprocal negative easement. It runs with the land sold by virtue of express fastening and abides with the land retained until loosened by expiration of its period of service or by events working its destruction. It is not personal to owners but operative upon use of the land by any owner having actual or constructive notice thereof. It is an easement passing its benefits and carrying its obligations to all purchasers of land subject to its affirmative or negative mandates. It originates for mutual benefit and exists with vigor sufficient to work its ends. It must start with a common owner. Reciprocal negative easements are never retroactive; the very nature of their origin forbids. They arise, if at all, out of a benefit accorded land retained, by restrictions upon neighboring land sold by a common owner. Such a scheme of restrictions must start with a common owner; it cannot arise and fasten upon one lot by reason of other lot owners conforming to a general plan. If a reciprocal negative easement attached to defendants' lot it was fastened thereto while in the hands of the common owner of it and neighboring lots by way of sale of other lots with restrictions beneficial at that time to it." [Underline and bold emphasis added]__A similar conclusion is drawn in Green v. Lupo, 32 Wn. App. 318, 647 P.2d 51 (1982) — The court held that an easement is not personal if there is anything in the grant to suggest that it was intended to be tied to the land retained or conveyed.
__There are other cases that opine that easements that run with the land, not just reciprocal negative easements, are not personal. "Being personal" and "running with the land" are mutually exclusive. It has to be one or the other depending upon the language, but cannot be both unless so stated.
__The reasoning that covenants, restrictions, easements, provisions or any document "that run with the land" are are therefore "not personal" is the same for all. Perhaps a provision could be made personal if explicitly stated as an exception to, or in addition to, "running with the land". Of course the double obligation would have to be addressed if a provision both "runs with the land" and "is personal" to some designated person.
__The same reasoning applies to property taxes which are not personal to the owner even though they are typically paid by the owner. Similarly, a variance granted on a property by a governmental body "runs with the land" and is "not personal".
__The Declarations for some common interest developments clearly state that unpaid dues and assessments are personal debts of the owner(s). For example, see
Additional examples are available in the Google searches in the Post Introduction for search words and terms. The DMCCR for Michaywé makes no such statement that unpaid dues and assessments are personal debt of the owner.
Mortgages and Promissory Notes
__Normally, both mortgages and promissory notes are negotiated at the same time. The mortgage defines the security for the loan and designates the property as the security. The mortgage runs with the land.
__The promissory note makes the loan a personal debt.
Discussion__Thus, any provision that limits the use of the property and "runs with the land" applies to the property and not the owner. It is not personal to the owner but can indirectly restrict the conduct of the owner through the restrictions on the use of the land. The owner cannot act to produce results (use of the property) that are restricted by the CC&Rs. More specifically, the actions of the owner are indirectly restricted but are limited to actions made on the property and do not extend to actions and conduct not made on the property. This is the concept described in the above.
__The same reasoning applies to any covenant, easement, document or provision that runs with the land. "Being personal" and "running with the land" are mutually exclusive unless both are stated. This reasoning ensures that the CC&Rs establishing the Common Interest Development and "running with the land" will not impinge on the rights of owners/members. It appears that, for covenants to be personal, such must be expressly stated.
Declaration of Master Covenants, Conditions and Restrictions (DMCCR) for the Michaywé Planned Unit Development
__With regard to dues and assessments, the authority to levy dues and assessments is defined and authorized in the DMCCR.
"ARTICLE V, ASSOCIATION FINANCES — Section 1. Properties Subject To Assessment. All of the Property Units included in the Restricted Property, except streets, parks, and common areas maintained for the general use of the Members of the Association, shall be subject to an annual charge (also referred to as “Association Dues”) and special assessments from time to time. Such annual charge is to be paid by each Owner for each Property Unit annually, in advance, on the first day of January of each year, or in installments including reasonable processing fees as may be provided by the Association; • • • "The "run with the land" provision is in the Witnesseth section of the DMCCR.
"WITNESSETH: — "• • • This Master Declaration shall be deemed to run with and bind the land • • • "There are no provisions in the DMCCR defining unpaid dues and assessments as personal debt. Rather, the DMCCR defines unpaid dues and assessments to be liens on the property unit.
"ARTICLE V, ASSOCIATION FINANCES, Section 5. Enforcement. (a) Lien. Sums assessed to an Owner which are unpaid, together with interest on such sums, collection and late charges, advances made by the Association for other liens to protect its lien, attorneys fees and fines (as allowed by the Governing Documents), constitute a lien upon the Property Unit or Units in the Land Development owned by the Owner at the time of the assessment before other liens except tax liens on the Property Unit in favor of any state or federal taxing authority and sums unpaid on the first mortgage of record, except that past due assessments (dues, special assessments, fees, fines and other charges) which are evidenced by a notice of lien, recorded as provided hereafter in this Section 5 • • • "__The second sentence in "ARTICLE V, ASSOCIATION FINANCES — Section 1. (see above) requires further analysis.
"Such annual charge is to be paid by each Owner for each Property Unit annually, in advance, on the first day of January of each year, or in installments including reasonable processing fees as may be provided by the Association; • • •"The meaning of annually and the date seems clear. But the meaning of "is to be paid by each Owner for each Property Unit" is ambiguous. Does it mean that only the owner can pay the annual charge? Would the payment not be valid if may by a third party? A summary interpretation for restrictive covenants in Michigan is:
“Restrictive covenants are to be read as a whole to give effect to the ascertainable intent of the drafter, and strictly construed against grantors and the parties seeking to enforce the covenants. All doubts are to be resolved in favor of the free use of property. Courts should not infer restrictions that are not expressly provided for in the controlling documents." (Case citations eliminated)The interpretation requirement "strictly construed against • • • the parties seeking to enforce the covenants" would appear to preclude an interpretation that unpaid dues and assessments are a personal debt — particularly when the DMCCR contains no statement about personal debt and states that the DMCCR runs with the land.
__The conclusion is that the unpaid dues and assessments become a lien upon the Property Unit, not a personal debt of the owner. Consequently, the unpaid dues and assessments are not a personal debt of the owner and cannot be collected as a personal debt of the owner.
What Happens when Property is Sold
__When property that is subject to a lien is sold, the title search uncovers the outstanding lien. The lien must be corrected to grant free title to the property. If the lien is not discharged and the property is transferred by Quit Claim Deed, the lien continues in force because it "runs with the land". However, the previous owner is likely not liable for the debt for the arguments stated above. This confirms that the debt "runs with the land" and is "not personal".
What is Occurring is Abusive
__Whatever the subject matter, the board of the Michaywé Owners Association is obligated to ensure that any action taken is valid under the law and the governing documents. If there is doubt as to whether an action is valid, then the action should not be taken to protect and maintain the rights of owners/members. It is fundamentally wrong for an owner/member affected by the action of the board to prove that the action is invalid under the law and governing documents. The board uses the money from all the owners/members to obtain a legal opinion that a contemplated action is valid. The standard should be what a court of appeals would likely affirm, not what might be plausibly argued if the action is contested.
__The board has begun to try to collect delinquent dues and assessments as personal debt and has filed lawsuits against the people who are owners of record of property units which have unpaid dues and assessments. Even though we may not be sympathetic to those who have not timely paid dues and assessments on property units titled in their names, we should not look the other way when a wrong is being imposed. That is a slippery slope. What is next? Our legal and cultural protections are fairness and justice, not "stop us if you can!" Moreover, the board should provide the legal opinion on which the board relied so that the owners/members can determine its quality and assess whether or not the legal opinion would be likely affirmed by the Michigan Court of Appeals.
__For more information, please read Formal Protest — Proposed Amendment to DMCCR Concerning Venue.
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Notice: Please be advised that I am not an attorney and that this post is not legal advice.
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- History:__
- 2009 Jan 29 — Initial Post
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