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HOA Case Study: A Board’s statements or conduct may establish the enforceability of its governing documents

An article in the Washington Post discussed a pending case in the Virginia Supreme Court regarding a dispute between property owners and a community association regarding the owners’ operation of a vineyard and retail store on their property. In an unpublished Order, the Virginia Supreme Court upheld a Fauquier County jury verdict for the property owners that had been set aside by the trial court.

Although unpublished orders do not have “precedential value or . . . significance for the law or legal system,” this case does provide us with a look at how difficult it can be for community associations to interpret their governing documents and also how a board’s previous actions may have an effect upon future enforcement of the community’s declarations and covenants. This blog post will review the facts of that case and its applicability to your HOA.

In Marterella v. Bellevue Landowners Council, Inc., the Marterellas developed a vineyard and winery on their lot. Thereafter, the Marterellas requested permission to open an on-site retail business on their property to sell the wine they produced. Despite the board’s denial of their request, the Marterellas began selling their wine on their property. The board filed suit to stop the retail business, claiming that the retail sale of wine violated the community’s declaration and covenants. The Marterellas counterclaimed, arguing that the Bellevue Landowners Council (“BLOC”) was estopped from enforcing the restriction on retail sales.

According to the facts set forth in the Supreme Court’s unpublished order, the Marterellas testified that

  • The community’s “handbook” stated specifically that “Agriculture is the only commercial activity expressly permitted under the covenants;” and
  • Across the street from the Marterellas’ property is a vineyard with on-site retail sales of the wine produced on that property; and
  • “on-site retail sale of wine is part of a farm winery and therefore was within the agricultural commercial activity” that is permitted by the governing documents; and
  • “other commercial activities were conducted on other properties in the community.”

The Virginia Supreme Court held that there was sufficient evidence in the trial record to support the jury’s verdict that:

  • The association’s previous statements or conduct permitted the use;
  • The Marterellas relied upon these association statements or conduct regarding that use; and
  • The Marterellas incurred expenses based upon that reliance.

Consequently, because there was sufficient evidence in the record for the jury to find for the Marterellas, the trial court erred to set aside the jury verdict.

In this case, it appears that the association drafted a “handbook” to provide guidance for enforcing the declarations and covenants. This “handbook” became a central part in this case. Does your association have a “handbook” that sets out interpretations of your governing documents? If so, you should have your community association lawyer review that handbook to ensure that its terms are consistent with the governing documents.

Furthermore, evidence that the association had permitted similar commercial activities appears to have influenced the jury’s decision. Does your association consistently enforce the restrictions in your governing documents? If not, you may be “estopped” from enforcing those restrictions later, based upon the board’s conduct or statements.

It may be time to meet with your HOA attorney and audit your association documents. As your community changes, your governing documents may need to change. As this case shows us, if a homeowner bases their conduct on a board’s statements, conduct, or documents, the association may not be able to prevent that activity.

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Tarley Robinson, PLC, Attorneys and Counsellors at Law

Williamsburg, Virginia

 

 

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John Tarley

John is the firm's managing partner and chairs the firm's small business, zoning, and litigation practice areas.

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Filed under: Common Interest Community, General Interest, HOA, HOA litigation, John Tarley, Real Estate Litigation, Susan B. Tarley, Unit Owners Association by John Tarley

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