Assessments Are in Full Force Even After Fraud Allegations

Assessments Are in Full Force Even After Fraud Allegations

It’s not uncommon for a member who hasn’t paid assessments or other fees to claim that he's withholding funds because of a perceived problem. But the good news for associations is that the obligation to pay assessments isn’t absolved because of alleged bad behavior by the association or management company. In a recent Washington case, a trial court ruled—and an appeals court agreed—that allegedly fraudulent condo sales didn't excuse assessment nonpayment.

In that situation, a condominium unit owner was obligated to pay a percentage of the condominium common area expenses. The condominium association sued the owner, seeking collection of unpaid condominium assessments. The owner claimed the association did not have the legal authority to require him to pay the assessments. He alleged that the condominium developer and real estate agents made misrepresentations and errors of omission, and as a result, the initial sale of units was a fraud. Based on this alleged fraud, the owner argued that the association didn’t have legitimate governing documents that gave it the right to collect assessments.

A trial court ruled in favor of the association, which had submitted declarations and documents showing it had the authority to impose and collect assessments. The owner appealed. A Washington appeals court upheld the trial court’s ruling. On appeal, the owner continued to assert that the association didn’t have the authority to seek payment of the condominium assessments because it lacked legal authority because of fraudulent sales of residential units by the condominium developer. But the owner presented no evidence to support this claim, said the appeals court.

The appeals court emphasized that it was undisputed that the association had the authority to impose assessments. It stressed that the declaration “grants authority to the condominium board of directors to determine the common and specially allocated expenses paid by the residential association and its members through monthly assessments.” Additionally, the association submitted declarations and exhibits showing the board approved and the owners ratified assessments every year since its inception, and evidence that the owner had attended these yearly meetings [2200 Residential Ass’n v. Grace, July 2016].