HOA Assessments Dispute Goes All The Way to Court

This case involved a dispute between an association owner/member (“Owner”) and a homeowners’ association (“Association”) over the manner in which the amount of the assessments paid by homeowners was determined. Association’s governing documents required that assessments be made on an equitable basis and further granted Association broad discretion in determining what the desired “equitable basis” was. Owner contended that the method utilized by Association was inequitable.

Association’s board decided to raise funds through a combination of use-based fees and per-lot assessments relying on authorization contained in Association’s governing documents. The board’s decision was then ratified by a vote of the members. Owner contended that Association’s method of allocating assessments equally to each lot was not equitable because not all lots in the development are the same in that some of the lots are developed with houses occupied by full time residents, some are undeveloped, and some lots were undevelopable. Thus, Owner contended that the assessments should be allocated based on the assessed value of each lot.

The trial court granted summary judgment in favor of Association after finding that Owner had not demonstrated that Association’s decision was unreasonable, and that the decision was protected by the business judgment rule. Owner appealed the trial court’s decision and the appellate court ruled that the business judgment rule did not apply because judicial deference

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