This case involved a dispute between condominium owners (Owners) and their homeowners association (Association) over the validity of rules and regulations adopted by Association which were not approved by a majority in interest of Associations owners. Associations rules and regulations were first adopted in 1985 and then subsequently amended in 2017. The relevant provisions contained in Associations bylaws concerning the adoption of rules and regulations state:
Section 2.03 of the Bylaws:
The Board of Directors shall have the powers and duties necessary for the administration of the affairs of the Condominium Association and shall do all such acts and things except as by law or by the Declaration or by these Bylaws may not be delegated to the Board of Directors by the Unit Owners. Such powers and duties of the Board of Directors shall include, but shall not be limited to, the following:
(e) Adoption and amendment of rules and regulations covering the details of the operation and use of the Property.
Section 5.17 of the Bylaws:
Rules and regulations concerning the use of the Units and the Common Areas and facilities may be promulgated and amended by the Board of Directors with the approval of a majority in interest of the Unit Owners.
The dispute started in early 2017 when Association filed a small claims action against Owners seeking to recover $38.29 in outstanding interest on Owners account plus an additional $500 in attorney fees. In response to Associations action, Owners filed a separate complaint against Association and certain members of Associations Board of Directors seeking a declaratory judgment that all of the rules and regulations that had been adopted by Association and which had not been approved by a majority of the Owners were void. Relying on the above language contained in Associations bylaws, Owners contended that Association was permitted to promulgate and amend rules and regulations but when it took action to do so, it had to be with the approval of a majority in interest of the unit owners. Association contended that the above language empowered Association to promulgate and amend rules and regulations regardless of ownership approval, but that the Board may seek to have its actions approved by a majority in interest of the owners.
The Trial Court Ruling:
The trial court ruled, as a matter of law, that none of the rules and regulations in question had been adopted properly in accordance with provisions contained in Associations bylaws. Association then appealed the trial courts judgment.
On review, the appellate court interpreted section 2.03 above to mean that the Board had the power and duties to adopt and amend rules and regulations regarding the operation and use of the property, but that power was limited by the words, except as by law or by the Declaration or by these Bylaws may not be delegated to the Board of Directors by the Unit Owners. The appellate court also interpreted section 5.17 to unambiguously limit the Boards broad authority under section 2.03 (e) to adopt and amend rules and regulations concerning the use, common areas, and facilities. Based on this interpretation, the appellate court ruled that the trial courts judgment that invalidated all rules and regulations that had been adopted by Association was overbroad.
Accordingly, the appellate court ruled that section 5.17 of Associations bylaws unambiguously states that in order to promulgate or amend rules of conduct concerning the use of the units, common areas, and facilities, Associations Board was required to seek approval from a majority in interest of the unit owners. All other rules or regulations could be adopted by the Board without involvement by the members. The appellate court then remanded the case back to the trial court for a determination of which of the rules and regulations in question pertained to conduct that governed the use of units, common areas, or facilities.
Maine Supreme Judicial Court decision (April 4, 2019)
See case decision: Scott v. Fall Line Condo