Court Opinion

ID: 8203235
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:47:58.341961+00
Date Added: 2024-06-11T16:41:01.790876
License: Public Domain

DAVID T. PROSSER, J.
¶ 32. (dissenting). The majority opinion states the principal issue as follows: "[M]ay a condominium complex prohibit the rental of condominium units through an amendment to the bylaws, or must such a restriction be placed in the condominium's declaration?" Majority op., ¶ 1.
¶ 33. In my view, the majority asks the wrong question because the question it asks is not susceptible to a yes or no answer. Whether a condominium complex may prohibit the rental of condominium units through an amendment to its bylaws is dependent not only upon the condominium declaration and the condominium instruments1 but also upon the facts of the case. These qualifications may be explained as follows.
¶ 34. First, Wis. Stat. § 703.10(3) (2007-08)2 permits a condominium's bylaws to contain "any restriction or requirement respecting the use ... of the units." However, Wis. Stat. § 703.30(4) also makes clear that "any conflict" between the declaration and a provision in the bylaws, or "any conflict" between the condominium instruments and a provision in the bylaws, must be resolved in favor of the declaration or the condominium instruments. (Emphasis added.) There is a conflict in this case. Thus, this case does not turn on general principles of condominium law. It turns on the terms of the condominium declaration.
¶ 35. Second, otherwise valid bylaws also must yield to conflicting statutory provisions. This principle is illustrated in Bankers Trust Co. of California v. *103Bregant, 2003 WI App 86, 261 Wis. 2d 855, 661 N.W.2d 498. In Bankers Trust, the Woodlands Condominium Homeowner's Association tried to enforce the condominium's new owner-occupancy bylaw by blocking the sale of a foreclosed residential condominium unit to a buyer who did not intend to reside in the unit. Id., ¶¶ 1-4, 11, 13. The Association lost. Id., ¶¶ 1, 20. The court of appeals concluded that using a condominium bylaw to block a sheriffs sale would tend to make the title to the property unmarketable, contrary to statute. Id., ¶¶ 18-20 (citing Wis. Stat. § 703.10(6)).
¶ 36. Third, some condominium use restrictions are so fundamental that experts in the field prefer to see them placed in the declaration. Jesse S. Ishikawa & Brian W Mullins, Drafter's Guide to Wisconsin Condominium Documents § 3.66 (2d ed. 2007) (hereinafter Ishikawa & Mullins (2007)).
¶ 37. In a 2004 publication, these two authors wrote that:
We do not consider the association bylaws to be the appropriate place for putting the use restrictions. Bylaws should set out the rules for corporate governance rather than rules for the leasing of individual units or the maximum weight of pets. Moreover, for the reasons discussed . .. infra, use restrictions have been invalidated in part because of their placement within the bylaws.
Jesse S. Ishikawa & Brian W. Mullins, Drafter's Guide to Wisconsin Condominium Documents § 3.65 (2004) (hereinafter Ishikawa & Mullins (2004)).
¶ 38. In their 2007 book, the authors appear to have modified their views, with the comment that "Use restrictions often appear in the declaration, but they can just as easily be placed in the association's bylaws or *104rules and regulations." Ishikawa & Mullins (2007), supra, at § 3.66. However, they add that "some restrictions . . . are so fundamental to the function of the condominium that they are appropriately included in the declaration." Id.
¶ 39. In their discussion of "Restrictions on Leases of Units" in the chapter on "The Declaration," Ishikawa & Mullins write the following:
[RJestrictions against the rental of units tend to be popular with unit buyers. Declarants tend to resist such restrictions, fearing that if the real estate market goes into a slump before the condominium units are all sold, they could be stuck holding a non-income-producing real estate asset for a long time. Finally, even those unit owners who don't want to see units rented recognize that there are situations in which rentals should be allowed — for example, when a unit owner is a professor taking a one-year sabbatical.
[A] number of provisions should be inserted into the condominium documents for the protection of the association's and other unit owners' interests. It is probably best to put these provisions into the declaration, which is a recorded document that would have priority over any lease and would provide record notice to any potential tenant.

The declarant, of course, may want to exempt its own units from these requirements.

Id. at § 3.69 (emphasis added).
¶ 40. Although a good argument can be made that condominium law has evolved from what it was 30 years ago, this evolution does not alter the intent of a *105declaration that was drafted 30 years ago. That is the effect of the majority opinion. Because I believe the majority is insufficiently attentive to the facts and the law that govern this case, I respectfully dissent.
I. BACKGROUND
¶ 41. Gloria and Steven MacHutta were the developers of the Apple Valley Gardens condominium. Steven MacHutta was the declarant and the person who incorporated the Apple Valley Gardens Association in July 1979.
¶ 42. Wisconsin repealed and recreated Chapter 703 of the Wisconsin Statutes, governing condominium ownership and regulation, in 1978. See Chapter 407, Laws of 1977. The applicable statutory law at the time Steven MacHutta filed the declaration in 1979 is virtually identical to the statutory law today. The applicable statutes have not been amended since 1978 in any way that reduces the declarant's rights in this case.
¶ 43. Chapter 703 defines "declarant" and "declaration." " 'Declarant' means any owner who subjects his or her property to a condominium declaration established under this chapter." Wis. Stat. § 703.02(7)." 'Declaration' means the instrument by which a property becomes subject to this chapter, and that declaration as amended from time to time." Wis. Stat. § 703.02(8). Among other key provisions in Chapter 703 are the following:
703.04 Status of the units. A unit, together with its undivided interest in the common elements, for all purposes constitutes real property.
703.09 Declaration. (1) A condominium declaration shall contain:
*106(g) Statement of the purposes for which the building and each of the units are intended and restricted as to use.
(j) Any further details in connection with the property which the person executing the declaration deems desirable to set forth consistent with this chapter ....
703.10 Bylaws. (1) Bylaws to govern administration. The administration of every condominium shall be governed by bylaws. Every unit owner shall comply strictly with the bylaws and with the rules adopted under the bylaws, as the bylaws or rules are amended from time to time, and with the covenants, conditions and restrictions set forth in the declaration or in the deed to the unit. Failure to comply with any of the bylaws, rules, covenants, conditions or restrictions is grounds for action to recover sums due, for damages or injunctive relief or both maintainable by the association or, in a proper case, by an aggrieved unit owner.
(3) Permissible additional provisions. The bylaws also may contain any other provision regarding the management and operation of the condominium, including any restriction on or requirement respecting the use and maintenance of the units and the common elements.
(5) Amendment. The bylaws may be amended by the affirmative vote of unit owners having 67% or more of the votes. . ..
*107703.24 Remedies for violations by unit owner or tenant of a unit owner. .. .
(3) Liability for violation by tenant.
703.30 Rules of Construction.. . .
(4) Conflicts in provisions. If there is any conflict between any provisions of a declaration and provisions of a condominium plat or any provisions of the bylaws, the provisions of the declaration shall control. If there is any conflict between any provisions of any condominium instruments and any provisions of any bylaws, the provisions of the condominium instruments shall control. If there is any conflict between any provisions of any condominium instruments or any provisions of any bylaws and any provisions of this chapter, the provisions of this chapter shall control.
703.31 Personal application. (1) All unit owners, tenants of the owners, employees of owners and tenants or any other persons that in any manner use property or any part thereof subject to this chapter shall be subject to this chapter and to the declaration and bylaws of the association adopted under this chapter.
(Emphasis added.)
II. Analysis
¶ 44. These condominium statutes must be applied to the facts of the case. Steven MacHutta was the declarant who subjected his property to the declaration *108and to the provisions of Chapter 703. He complied with Wis. Stat. § 703.09(l)(g) by drafting a declaration that contained a statement of the intended purposes of the buildings and the units, and it contained restrictions as to use of these properties. The statement is contained in paragraph 8 of the declaration and reads as follows:
8. PURPOSE - RESTRICTION ON USE. The buildings and each of the units are intended for the purpose of single family residential use only and are restricted to that use. Any lease or oral or written rental agreement shall not relieve an owner from his obligation to pay common expenses or any other obligations imposed upon unit owners by this Declaration.
¶ 45. This paragraph states the overriding purpose of the buildings and the units: "single family residential use only." Conflicting uses are restricted. See Wis. Stat. § 703.30(4). The rental of condominium units is normally consistent with this stated purpose of the declaration. The lease and rental of units for "single family residential use" are clearly contemplated by virtue of the next sentence: "Any lease or . . . rental agreement shall not relieve an owner from his obligation to pay common expenses or any other obligations imposed upon unit owners by this Declaration." (Emphasis added.)
¶ 46. The language in paragraph 8 of the Apple Valley declaration contrasts with the language in the original bylaws drafted by the declarant of the Minooka Park Homes condominiums in Le Febvre v. Osterndorf 87 Wis. 2d 525, 525, 275 N.W.2d 154 (Ct. App. 1979), a decision issued approximately six months before Steven MacHutta's declaration was filed. The original bylaws in that case read as follows:
In order to preserve high standards of maintenance and care and the other benefits from a low turnover of *109occupants, no unit may be rented without the prior written consent of the Board of Directors. The Board of Directors shall have the obligation to answer any written request by a unit owner accompanied by such information concerning the proposed tenant and the terms of the proposed lease as the Board of Directors uniformly requires, within 10 days after such request and failure to do so within the stipulated time shall constitute a consent by the Board of Directors to the proposed leasing.
Id. at 528 (emphasis added).
¶ 47. In Le Febvre, every person acquiring or using a condominium unit at Minooka Park Homes was put on notice from the beginning that "no unit may be rented without the prior written consent of the Board of Directors." Id. at 528, 534-35.
¶ 48. That is not the case here. More than 20 years after Apple Valley was established, the Association membership amended the bylaws to require that all units be owner-occupied. The 2002 amendment added: "No residential unit owner shall rent, lease or otherwise so devise any residential unit or any part therein." This amendment significantly altered a unit owner's rights to the use of his or her property. Inasmuch as most owners of multiple units cannot afford to occupy more than one unit in the same condominium complex, they are effectively forced to sell some of their property.
¶ 49. The majority opinion recognizes the need to address the issue of conflict between the revised bylaws and the declaration. See Majority op. ¶¶ 20-26. It resolves the issue by determining that there is no conflict. Id., ¶ 26. To support this proposition, the majority observes that "No provision of the declaration *110expressly permits renting units." Id., ¶ 25. This observation misses a larger point.
¶ 50. Wisconsin Stat. § 703.04 provides that a condominium unit "for all purposes constitutes real property." (Emphasis added.) This section is cited in Le Febvre, 87 Wis. 2d at 533 n.7, where the court notes that, "The established law of real property is . . . applicable to condominium units," id. at 533. If the established law of real property is applicable to condominium units, then there is no need for the declaration to set out express permission for a unit owner to rent his property. The right to rent is inherent in the "exclusive ownership" of a unit. See Wis. Stat. § 703.05.
¶ 51. The understanding that a unit owner has a right to rent is confirmed, as it is today, by the statutes in place in 1979. Wisconsin Stat. §§ 703.24 and 703.31 refer explicitly to the tenants of unit owners.
¶ 52. This, admittedly, does not settle the issue. Condominium law is different from basic property law in that condominium property owners have shared responsibilities and are often subject to restrictions that traditional property owners are not. Nonetheless, restrictions on the use of property "are not favored in the law," McKinnon v. Benedict, 38 Wis. 2d 607, 619, 157 N.W.2d 665 (1968) (quoting Mueller v. Schier, 189 Wis. 70, 82, 205 N.W. 912 (1926)) (internal quotations omitted), and where doubt exists about a restriction, that doubt should be resolved "in favor of the free use of property," id. (citing Stein v. Endres Home Builders, Inc., 228 Wis. 620, 629, 280 N.W. 316 (1938)).
¶ 53. Certainly, there is doubt here. Section 8 of the declaration confirms the inherent right to lease or rent for single family residential use when it refers to "[a]ny lease or oral or written rental agreement." There would be no need to specify a unit owner's continuing *111obligation to pay common expenses if the owner could not lease or rent the unit to a tenant under the declaration.
¶ 54. Section 8 of the declaration complies with Wis. Stat. § 703.09(l)(g) by stating a purpose and stating a restriction (namely, the restriction on unit use for a purpose other than "single family residential use"). Thus, it cannot be said that the declarant here did not know how to place a fundamental restriction in the declaration. Clearly, the declarant did not desire or intend to place a restriction on leasing or renting in the declaration.
¶ 55. The evidence for this is the fact that, after the declaration was filed, the declarant rented condominium units. The Association acknowledges that, in 1988, almost a decade after the declaration was filed, Gloria and Steven MacHutta owned 15 units that they rented to tenants.
¶ 56. To sum up, the declaration itself does not impair a unit owner's property right to lease or rent a condominium unit. By its language, the declaration recognizes that right. The statutes also recognize that right. The declarant's unbroken practice since the filing of the declaration was to rent some of the condominium units. In short, the amended bylaws appear to conflict with the declaration as it was intended and consistently interpreted.
¶ 57. The Association argues that the rule of construction set forth in Wis. Stat. § 703.30(5) requires condominium documents to be construed together in an attempt to "avoid legal technicalities that create conflict." It is not possible, however, to harmonize provisions that permit and prohibit owners to rent their condominium units. The fact that the 2002 amended *112bylaws allowed unit owners to continue renting to existing tenants underscores the lawfulness of renting under the declaration.
¶ 58. Given a unit owner's right to rent under the declaration, it is very significant that the declarant took pains to provide himself with a veto power over amendments to the declaration.3 Section 24 of the declaration reads as follows:
24. Amendment. Prior to the first meeting of the Association, this Declaration may be amended by the Declarant. Thereafter, his [sic] Declaration may be amended by an affirmative vote of not less than two-thirds of all votes entitled to be cast by unit owners at a meeting called for that purpose; provided, however, that so long as the Declarant is the owner of any unit, which has not initially been sold, no amendment shall be effective without the consent of the Declarant.
(Emphasis added.)
¶ 59. By this provision, Steven MacHutta did his best to protect his and Gloria's right to rent. This bargained-for provision ostensibly firmed up the MacHuttas' right to rent for as long as they owned any unsold unit within the Association.
¶ 60. Arguably, the veto provision prevents any amendment to the declaration over the opposition of the declarant, so long as the declarant is the owner of any unsold unit within the Association. Whether a bona fide amendment to the declaration would prevail over such a restriction is an interesting question that would have come to the fore if the Association had tried to *113amend the declaration. In any event, it is difficult to see how a declarant who tried explicitly to assure his veto power over a disfavored amendment to the declaration nonetheless intended to permit an amendment to the bylaws that would undo the economic interest in renting that he was trying to protect by his veto power.
¶ 61. This brings us to Wis. Stat. § 703.30(4), which is central to this litigation. It reads: "If there is any conflict between any provisions of a declaration and . . . any provisions of the bylaws, the provisions of the declaration shall control." Wis. Stat. § 703.30(4) (emphasis added). To contend that there is no conflict between any provision in the declaration and any provision in the amended bylaws simply ignores reality. Yet, to concede "any conflict" decides the case for the MacHuttas.
¶ 62. When a unit owner's right to rent is abrogated by an amendment to the condominium bylaws, the owner's investment and the owner's ability to relocate temporarily for employment or family can be seriously affected. The abrogation can also adversely affect the rights of third parties, such as mortgagees. Chapter 703 permits these rights and interests to be adversely affected but only in accordance with the declaration and the statutes. Because that did not happen here, I must respectfully dissent.

 " 'Condominium instruments' mean the declaration, plats and plans of a condominium together with any attached exhibits or schedules." Wis. Stat. § 703.02(5) (2007-08).

 All subsequent references to the Wisconsin Statutes are to the 2007-08 version unless otherwise indicated.

 See Wis. Stat. § 703.09(l)(j) (allowing the declaration to include "[a]ny further details in connection with the property which the [declarant] deems desirable ... except those provisions which are required to be included in the bylaws").