Court Clarifies Lakefront Land Ownership

Associations that border Lake Erie and other bodies of water have often wondered where along the lakefront the Association’s property ends and the public’s property begins. Recently, The Ohio 11th District Court of Appeals in the case of State ex rel Marrill v. ODNR (Case # 2008-L-007) helped to answer that question.

The Plaintiffs, a group of landowners that border Lake Erie, argued that their property rights extend to the “shoreline” of the water, wherever that line may be. The Defendants, the State of Ohio and others, argued that the State of Ohio owns and holds in trust for the people of Ohio the lands and water of Lake Erie up to the natural location of the ordinary high water mark, regardless of the shoreline’s current state.

Siding with the Plaintiffs, the court held that the public owns the land beneath the water at any given moment, and the lakefront property owner owners the dry land above the water. In other words, the lakefront owner owns all of the lake up until the water line. Therefore, as the water levels of Lake Erie rise and fall, so too does the lakefront property line.

This ruling is good news for Ohio’s condominium and homeowner associations which wish to keep lakefront property “private.” Absent a superseding law, agreement, or further review by the Ohio Supreme Court, this court’s ruling provides important clarification regarding where an association’s property ends and the public’s begins. As an association generally has the ability to place reasonable rules and regulations on the comment element property, an association would be able to regulate individual access and activities that takes place on land up until the shoreline.

It Takes a Judge to Invalidate an Election

While it takes a judge to invalidate an election, generally owners may recall a board. Recently, we attended an annual meeting with a very close election. Nine candidates were nominated to fill four positions. While all the proper election procedures were followed, several of the candidates were unaware of their ability to solicit proxies from their fellow homeowners. As a result, two incumbents were re-elected as well as two candidates who generally favored the actions of the current board. The election results were achieved even though the vast majority of owners in the room opposed the current board and their courses of action.

Two days after the elections, a few of the defeated candidates circulated a petition among the owners aimed at calling a special meeting. The defeated candidates not only wanted a new meeting, but also wanted a new election.

The bylaws of every association must be carefully reviewed in the instance of a contested election. At this association, signatures of 25% of the owners are required to call a special meeting. The defeated candidates had no trouble getting the 25% owner signatures, however the bylaws make no provision for invalidating an election. As a result, the only way the defeated candidates could invalidate the election would be through judicial proceedings. (remember Bush v. Gore)

Bylaws of most associations do contain a provision for removing board members. At this association, removal of board members requires a vote of a majority of owners in the entire association. Last week, the special meeting of the owners was called and 85% of the owners were present in person or by proxy. Again, the results were very close, however, only 45% voted to remove the recently elected board members, while 40% voted they retain their positions. While some may think the vote to recall the board succeeded, it is important to note that the bylaws mandate that a "majority of the entire association" is needed for removal and the 45% obtained was shy of a "majority of the association." As a result, the recently elected board members remain in their positions.

If the governing bylaws had been silent as to removal, the disgruntled owners would have been left with no alternative but to go to court to invalidate the election. However, as history has shown and caselaw clearly indicates, absent out right fraud, forgery, or gross procedural injustice, courts are weary of mandating a new election.

Associations Benefit from Bailouts

As many of Ohio’s condominium and homeowner associations face many financial challenges, there has been one indirect source of relief: federal bailouts. The positive effect this generates has been noticed by many local communities, and now the press. The following is an excerpt of an article published in the Columbus Daily Reporter on 8/10/2009:

Homeowners Associations Indirectly Benefiting From Bank Bailouts, Insiders Say

RICK ADAMCZAK
Daily Reporter Staff Writer
08/07/2009

Many banks and troubled homeowners have been helped by the federal government's bank bailouts, but other beneficiaries of that assistance are homeowners and condominium associations.

During the peak of the housing crisis, which was coupled with the onset of the recession, homeowners associations started to see their revenues fall as some of their members, who perhaps lost their jobs, struggled financially and couldn't afford to pay their association dues.

In severe cases, home mortgages would be foreclosed upon.

Homeowners associations themselves, in fact, can start foreclosure proceedings against a homeowner if that homeowner has fallen far behind on its dues or fees, which can range from a few dollars a month to hundreds of dollars a year depending on how much common space and amenities need to be maintained.

But following the bank bailouts, banks started working more with their borrowers to help them keep their homes and therefore they also can keep up with their association dues, said David Kaman, a partner at the law firm Kaman & Cusimano LLC, which has an office in Columbus and specializes in homeowners and condominium legal issues.

"We've seen a tremendous impact from the bank bailouts," he said. "The biggest thing going on is the banks with bailout money. In mediation they sit down with the unit owner and work out new terms."

He said the law greatly benefits homeowners associations in foreclosure cases. If a condominium is in foreclosure the bank pays past-due fees and must also pay any associated legal fees.

Dues and fees collected by homeowners and condominium associations are used to pay for the upkeep of common areas, ponds and even community pools in some cases. For condominiums, maintenance of the buildings themselves is paid for by the dues.

Typically, if a homeowner starts to fall behind on dues payments, the homeowners associations - many of which are operated by property management companies - will send a collection letter to the delinquent homeowner.

"Usually they'll owe from $1,000 to $3,000, which isn't much when compared to losing your home," said Kaman.

If that fails to resolve the issue, a letter is sent threatening to put a tax lien against the home or condominium.

For several years many homeowners or condo owners would take out home equity loans to pay off the balance owed, but as banks cut back on those loans some owners were put in difficult situations.

"When they get the letter, most people pay. We see a lot come in at the lien stage, too," said Kaman.

In a worst-case scenario the association files a foreclosure against the owner.

"We do, by statute, have that power. We have filed hundreds of those," said Kaman.

He said the biggest mistake homeowners associations make is to wait for the bank to take action instead of taking action themselves.

"They might be losing tens of thousands of dollars in those cases. As a result the other owners have to pay the dues," Kaman said. "We get hired by some associations and find that they have $30,000 or $40,000 worth of outstanding fees. It got that high because the board was not taking aggressive action."

While many homeowners or condo associations are run by property management companies, others are run by volunteer boards of directors composed of members.

Homeowners falling behind on their association payments are only hurting their neighbors, he said, especially if it's not a large development.

"If you have a 40-unit complex and four people are not paying, the other 36 have to cough up the money," said Kaman. "We take the 'pay or lose your home' attitude. That owner is hurting his neighbors."

Every Board Needs Officers!

Kaman & Cusimano, LLC was recently hired by a condominium association in Delaware, Ohio. The association owners had validly elected its five (5) member Board of Directors. However, each Director was currently serving in an “at-large” capacity, meaning the Board had no elected officers.

Ohio Revised Code Section 5311.08 governs Ohio condominium associations. This law specifically states that “The board of directors shall elect a president, secretary, treasurer, and other officers that the board may desire.” (Emphasis added)

In other words, Ohio condominium association boards MUST elect officers. A President is needed to chair meetings. A Secretary is needed to ensure that proper minutes are kept reflecting board decisions. A Treasurer is necessary to be responsible for an association's finances. Even with a manager or management company, a board and officers are still required.

While there is currently no similar law that applies to Ohio homeowner associations, our office recommends that HOA boards follow the mandate for officers contained in the condominium law as this practice promotes good decision making, good record keeping, and proper fiscal responsibility.

For a general guide on officer responsibilities, Kaman & Cusimano clients who have attended our recent Orientation/Success Basics for Board Members Seminar should turn to page 10. Additionally, Kaman & Cusimano clients can view the article “Owners Elect Board - The Board Elects Its Officers” from the Client Articles section of our website. (www.ohiocondolaw.com)