Holding: The Supreme Court of Vermont held that a homeowners association, as assignee from the developer, could charge lot owners for its reasonable costs to maintain the subdivision private roads and water system, including litigation and other overhead costs.
The Facts: A 92 lot subdivision in Vermont was developed in the 1960s. The subdivision contained private roads and a private water system that was to be maintained by the developer. Owners/Purchasers of the lots were granted the right to use the private roads and water system, and a service fee for said use was imposed.
In 1998, maintenance of the private roads, streetlights, water system, and recreational facilities was turned over from the developer to a homeowners association (the “Association”). The Association continued to charge the homeowners a service fee to maintain these parts of the subdivision per the relevant subdivision deed, which included litigation and overhead costs.
In 2009, a Homeowner Plaintiff alleged that the service fee was unreasonable and refused to continue paying. In 2012 the Association brought suit for the unpaid fees. The trial court held that the deed created a limited contract that required the Association, as the developer’s assignee, to provide certain services to Homeowner Plaintiff for a fee. While the trial court held that the service fees charged by the Association were legal, they disagreed on the amount, and asserted that because Homeowner Plaintiff only used a fraction of the private road, he should not have to pay to maintain the entirety of the roads.
The Association appealed, and alleged that calculating service fees for each homeowner based on individual road usage was unreasonable, expensive, and would lead to future litigation. The Supreme Court of Vermont agreed, finding that the deed allowed the Association to set the service fees as long as they were reasonable and made in good faith, and that the trial court was not entitled to make up its own fees.
The Supreme Court of Vermont also held that Homeowner Plaintiff failed to establish that the Association acted in bad faith by including its litigation and other overhead costs in the annual service fee. The Association needed to pursue litigation to collect unpaid assessments to continue providing the essential subdivision services. Accordingly, the trial court’s judgment was reversed.
Lesson: Be sensible and try to look at issues from everyone’s side. Although in this case the Homeowner Plaintiff thought it unreasonable for him to have to pay for a portion of the whole road when he didn’t use it all, this would make the Association’s job almost impossible to individually assess such fees. Had the Homeowner taken the time to consider the practical effect of what they were seeking, they could have potentially saved a great deal of time and litigation costs.
