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Lake Shawnee Club, Inc. v. Akhtar

A-5681-08T3 (N.J. Super. App. Div. 2010) (Unpublished)

HOMEOWNERS ASSOCIATIONS; DEEDS; WAIVER — Where a homeowners association, for forty years or more, fails to enforce a mandatory membership requirement set forth in its original deed, it can be held to have waived the obligation that residents and their transferees be members of the association even though the obligation runs with the land.

An association had 550 residential lots. Its original deed mandated its residential members pay membership dues for the first twenty years after the date of the deed. After the twenty year period ended, the association’s practice for a period of more than forty years was to treat membership as optional despite the deed covenants mandating membership for any purchaser of lots. After that 40 year period, the association’s board adopted a resolution reinstating mandatory membership and establishing an initiation fee to be paid by new purchasers. Three owners who had purchased lots when membership was optional refused to pay these fees. All claimed that their seller or the association told them membership was voluntary and these representations induced them to purchase their properties. They also complained that it would be more difficult for them to sell their respective properties if their buyer would be obligated to pay an initiation fee to join the association and had to pay annual subsequent dues.

The association sued them and the lower court ruled that because the association had a forty year policy of treating membership as optional, the association had abandoned its right to charge dues and was estopped from enforcing covenants in the owners’ respective chains of title. The lower court determined that the association was the party benefitting from a deed restriction and had, by adopting a contrary position for a long period of time, abandoned the right to enforce it. It concluded that three owners would be unfairly burdened.

On appeal, the Appellate Division affirmed based upon the same facts that the lower court deemed sufficient to establish abandonment and estoppel in what amounted to a waiver of the association’s claim for relief. The Court found the lower court acted appropriately in this matter, and held that even though the mandatory membership requirement was a condition running with the land, the association’s conduct permitted the denial of relief to the association based upon the doctrine of waiver because the proofs demonstrated the association’s failure to enforce the covenant in specific instances (affecting three owners).

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