Court Weighs In on Ownership Rules and Background Checks

This case highlights the importance of properly enforcing bylaws, especially when it comes to ownership transfers and background checks. However, it is important to note that this decision applies specifically to Ohio and does not necessarily impact HOAs in all 50 states. HOA laws vary by state, and not all states permit background or credit checks for ownership transfers.

Background of the Case

Tattershall One Condominium Unit Owners’ Association (the HOA) filed a lawsuit against three individuals—Ms. Marks, Mr. Bretz, and Ms. Utterdyke—over the transfer of a condo unit. The HOA argued that these individuals failed to comply with its recently amended bylaws, which required background and credit checks for new owners.

Here’s what happened:

• The condo unit was originally owned by Ms. Clark, who transferred it to her niece, Ms. Utterdyke, upon her passing.
• Ms. Utterdyke then sold the unit to her son, Mr. Bretz, and his fiancée, Ms. Marks.
• The HOA claimed that all three failed to complete the required background and credit checks before the transfer and occupancy, violating the bylaws.

The HOA’s Legal Position

The HOA relied on a 2022 amendment to its bylaws, which required new owners and occupants to pass an “acceptability check” (including background and credit checks). The HOA contended that:

1. Ms. Utterdyke failed to complete the checks when she inherited the unit.
2. Mr. Bretz and Ms. Marks failed to comply before taking ownership and moving in.
3. The sale was therefore invalid under the bylaws, and the HOA sought to have it voided.

Court Decision and Key Takeaways for HOAs

The court’s ruling was a mix of wins and losses for both sides: