Association can’t collect assessments despite unauthorized rezoning

A circuit court correctly dismissed claims made by a property association that a business failed to pay assessment fees after rezoning commercial property without its approval in breach of declarations, the Court of Appeals of Virginia has held.

The current owner argued that it wasn’t subject to the commercial declaration or obligated to pay assessment fees because it bought the property shortly after it was rezoned. The circuit court granted demurrer.

Judge Richard Y. AtLee agreed that the association’s claims against the prior owner were irrelevant to its action against the current owner. Further, the association didn’t cite anything in its declarations providing that “every lot in its purview is subject to assessment.”

“[T]he Association disregards Section 4.3 of the Commercial Declaration, which provides that if property covered by the declaration was rezoned for residential purposes, then the Association, acting through its Board of Directions could withdraw the property from the Commercial Declaration, and immediately subject the property to the Residential Declaration,” AtLee found.

Chief Judge Marla Graff Decker and Judge Mary Grace O’Brien joined AtLee’s unpublished opinion in Ashburn Village Community Association Inc. v. Waltonwood Ashburn LLC (VLW 024-7-229).

Unauthorized rezoning

Ashburn Village Community Association oversees property consisting of several commercial and residential lots in Loudoun County. Commercial and residential declarations outlined the rights and obligations of owners within the association’s purview.

Waltonwood Ashburn purchased property in an office park governed by the association. Shortly before that purchase, the property qualified as a commercial lot subject to that declaration.

Two months before Waltonwood purchased the property, then-current owner — B.F. Saul Real Estate Improvement Trust — convinced the county board of supervisors to rezone the property for development of a congregate care facility for elderly residents.

The commercial declaration forbids an owner from rezoning property without association approval. It was undisputed that B.F. Saul didn’t seek approval and that the association didn’t follow the procedure to subject the property to the residential declaration.

Waltonwood constructed an elderly congregate care facility on the property and never paid assessments to the association. The association sued for breaches of the commercial and residential declaration, as well as injunctive relief.

The circuit court granted Waltonwood’s demurrer, and the association appealed.

Record owner

The Supreme Court of Virginia held in Sainani v. Belmont Glen Homeowners Ass’n that restrictive covenants “‘are to be construed most strictly against the grantor and persons seeking to enforcement, and substantial doubt or ambiguity is to be resolved in favor of the free use of property and against restrictions,’” AtLee noted.

Where the intention of the parties is clear, the restriction is reasonable and “‘if it is apparent from a reading of the whole instrument that the restrictions carry a certain meaning by definite and necessary implication,’” the Sainani court held that restrictive covenants should be enforced.

Here, the association relied on Section 16 of the commercial declaration to argue that Waltonwood’s rezoning of the property constituted a material breach.

“Article 16, however, places the obligation to seek approval to rezone property on the lot’s ‘Owner,’” AtLee pointed out. “The Commercial Declaration defines owner as the person that owns the lot in fee simple.”

The association didn’t dispute that Waltonwood obtained title to the property two months after the board of supervisors approved the rezoning application.

“Thus, Waltonwood was not the owner of the Property when the Property was rezoned and had no obligation to the Association to seek approval,” the judge said and rejected the association’s argument for breach of the commercial declaration.

Multifamily property

According to the association, it was “incredible that Waltonwood, after willfully breaching Section 16 of the Commercial Declaration, would subsequently refuse to pay the Assessments on the grounds that it is not an Owner.”

Waltonwood, however, wasn’t subject to assessments under the terms of the commercial declaration; at the time it took title, it had been zoned as an elderly congregant care facility, AtLee said.

“The Commercial Declaration distinguishes an elderly congregant care facility from a commercial lot and designates such a facility as a multifamily residential lot,” the judge wrote. “Moreover, it explicitly provides that the term owner meant an owner of a commercial lot ‘unless specifically indicated otherwise.’”

No section of the commercial declaration specifically assessed fees for multifamily lots. Since the property was zoned as a multifamily residential lot for the duration of Waltonwood’s ownership, Waltonwood didn’t own a commercial lot under the plain language of the commercial declaration and wasn’t required to pay assessments, AtLee said.

Residential assessment

If Waltonwood wasn’t subject to the commercial declaration, the association argued that it must be subject to the residential declaration; every lot under the association’s purview was subject to one declaration or the other, it claimed.

“The Association does not cite any provision in either the Commercial or Residential Declaration that states that every lot in its purview is subject to assessment,” AtLee said. “Rather, in making its argument that Waltonwood alternatively owed assessments under the Residential Declaration, the Association disregards Section 4.3 of the Commercial Declaration, which provides that if property covered by the declaration was rezoned for residential purposes, then the Association, acting through its Board of Directions could withdraw the property from the Commercial Declaration, and immediately subject the property to the Residential Declaration.”

The association failed to do so. As such, the property wasn’t subject to the residential declaration, and the circuit court didn’t err by sustaining Waltonwood’s demurrer.

Injunctive relief

Seeking to enjoin use of the property as an elderly congregate care facility, the association asserted that Waltonwood violated its property rights by failing to obtain approval prior to rezoning.

An injunction is an appropriate remedy for enforcing a real property right. Citing Norfolk S. Ry. v. E.A. Breeden, Inc., AtLee said a “‘party seeking to enforce a real covenant is generally entitled to the equitable remedy requested upon showing the validity of the covenant and its breach.’”

The association’s argument failed because Waltonwood didn’t own the property at the time of rezoning.

“To the extent that the rezoning violated the Commercial Declaration, it was B.F. Saul, the owner of the Property at the time of the rezoning, that violated the Commercial Declaration, not Waltonwood,” the judge wrote.

Thus, the association’s claims against B.F. Saul were irrelevant to its action against Waltonwood and the circuit court did not err in sustaining the demurrer.