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Condo | HOA Lawyers

Commercial Units in Mixed-Use Condominium Not Responsible for Residential Unit Costs

Harrison v. Casa de Emdeko, Incorporated, No. SCWC-15-0000744 (Haw. Apr. 26, 2018)

Holding

The Supreme Court of Hawaii held that, under the Hawaii Condominium Property Act, expenses for building components that served only particular units (residential units in this case) in a mixed-use project had to be allocated as limited common expenses to the units served, even though the declaration of the association did not assign the components as limited common elements.

The Facts

Harrison purchased two commercial condominium units out of a mixed use condominium project consisting of both residential and commercial units. The residential units were completely separate from the commercial units. Even though she only owned commercial units, Harrison was assessed expenses for elevators, lanai railings, and drains for the residential buildings. After Harrison brought suit for being improperly charged, alleging that the items were limited common elements, the association responded that Harrison never objected to the costs during her 30 years of ownership or her tenure on the association’s board of directors.

The trial court concluded on summary judgment that the residential building elevators, lanai railings, and drains were common elements since the declaration did not specifically assign them as limited common elements, and therefore the assessments to Harrison were proper. The trial court also held that Harrison was barred from complaining about the expense because she acquiesced in the allocations after she should have known how the funds were applied.

The Hawaii Court of Appeals agreed with the trial court, and went a step further holding that the lanai railings were common elements to the entire project under the Hawaii Condominium Property Act (“Act”) regardless of whether they exclusively served the residential units.

The Hawaii Supreme Court looked to the Act to determine who should bear the cost of the assessments. The Act specifies that, in a mixed-use project, costs to maintain and repair limited common elements will be borne by the owner of the unit to which the limited common element is appurtenant. The supreme court held that items not listed in a declaration as limited common elements (such as the elevators, lanai railings, and drains in this case) can still be characterized as such for purposes of determining who should be assessed to maintain the items. The supreme court then found that the elevators were exclusive to the residential buildings, and therefore were limited common elements of the residential buildings to which Harrison could not be assessed.

Lessons Learned.

  1. Regardless of how long you go in the wrong direction (in this case more than 30 years) courts will apply the law as written, so when you discover something that does not comply with the law as written, change course so that you do comply; and
  2. Being right can be very expensive, since ultimately to succeed the unit owner had to appeal both the trial court and appellate court decisions, before the state supreme court found that the contested areas were limited common areas. (So make your documents are clear in the first place, or amend them so that they are clear now, to avoid these expenses).

If you have any questions, please feel free to contact us.

 

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