Residential Communities of America v. Escondido Community Association

The Residential Communities of America (RCA) (plaintiff) developed and sold the first of three phases of planned units in the Escondido Community condominium, which was originally marketed as an adult community. RCA retained ownership interests in the two remaining undeveloped condominium parcels. The original declaration could be amended by either a two-thirds vote of the association’s board of directors or a two-thirds vote of the owners, provided that the developer consented to or was joined in any amendment affecting its rights. The original declaration also prohibited the residency of children under the age of 17 in any unit for a time exceeding 60 days. After the Fair Housing Amendments Act of 1988 was passed, the enforceability of the condominium’s restriction against child residents became questionable unless 80 percent of the units had an occupant over 55 years old. To ensure that the community would meet this requirement, a two-thirds vote of the board of directors of the homeowners’ association (the association) (defendant) amended the declaration to prohibit the sale or lease of any unit to any party without an occupant at least 55 years old. The association did not notify nor seek the joinder or consent of RCA; the association believed that it was not necessary, because RCA held no units for sale at that time of the amendment, meaning RCA was not a developer within the meaning of that term in the declaration. The trial court ruled for the association. RCA appealed, arguing that it was a developer and that the amendment adversely affected its ability to market its undeveloped parcels and, therefore, it should not be bound by the amendment. State condominium law prohibited certain assessments or actions that could hinder a developer’s sale of units, but it did not define a developer as one who currently held completed units for sale. Another provision defined a developer as one who created a condominium or offered condominium parcels for sale or lease in the ordinary course of business.