Apple Valley Garden Association, Inc. v. MacHutta
763 N.W.2d 126 (2009)
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Rule of Law:
A condominium association may prohibit the rental of units through a duly adopted amendment to its bylaws, provided the amendment does not conflict with the condominium's declaration. A bylaw restricting the use of a unit, such as a rental prohibition, does not render the title to the unit unmarketable.
Facts:
- In 1979, Steven MacHutta developed the Apple Valley Gardens condominium complex and recorded a declaration.
- The declaration stated units were for "single family residential use only" and, while not prohibiting rentals, noted that a "lease or...rental agreement shall not relieve an owner from his obligation to pay common expenses."
- Gloria MacHutta and Steven MacHutta each owned a condominium unit in the complex.
- On December 18, 2002, the Apple Valley Gardens Association amended its bylaws to prohibit the rental of units and require them to be owner-occupied.
- The 2002 bylaws amendment contained a grandfather clause, allowing existing leases to continue until the current tenant vacated.
- In 2004, the tenant residing in Gloria MacHutta's unit moved out.
- Gloria MacHutta then leased her unit to a new tenant over the express objection of the Association's board, which cited the 2002 bylaws amendment.
Procedural Posture:
- Apple Valley Gardens Association sued Gloria and Steven MacHutta in the Circuit Court for Waukesha County (trial court), seeking a declaratory judgment that the bylaws amendment was enforceable.
- The MacHuttas filed a counterclaim against the Association.
- The trial court denied the MacHuttas' motion for judgment on the pleadings.
- Both parties filed cross-motions for summary judgment, and the trial court granted summary judgment in favor of the Association.
- The MacHuttas, as appellants, appealed to the Wisconsin Court of Appeals.
- The court of appeals affirmed the trial court's grant of summary judgment for the Association, the appellee.
- The MacHuttas, as petitioners, sought and were granted review by the Supreme Court of Wisconsin.
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Issue:
Does a condominium association's amendment to its bylaws prohibiting the rental of units constitute an enforceable use restriction under Wisconsin law, even if the condominium's declaration contemplates the possibility of rentals?
Opinions:
Majority - Gableman, J.
Yes, a condominium association's amendment to its bylaws prohibiting the rental of units is an enforceable use restriction. Wisconsin Statute § 703.10(3) expressly permits bylaws to contain restrictions on the use of units. There is no conflict with the declaration because its language merely contemplates the possibility of rentals to clarify that owners remain financially responsible to the Association; it does not grant an affirmative or permanent right to rent. The gravamen of the declaration's provision is to ensure financial obligations are met, not to establish an inalienable right to lease. Furthermore, this use restriction does not render title unmarketable under Wis. Stat. § 703.10(6), as it affects only the use of the property, not the owner's legal ability to convey title.
Dissenting - Prosser, J.
No, the bylaw amendment is not enforceable because it conflicts with the rights established in the condominium's declaration. A condominium unit is real property, and the right to rent is an inherent aspect of property ownership unless explicitly restricted. The declaration, by referring to leases and rental agreements, recognizes and confirms this inherent right, creating a conflict with the bylaw's subsequent prohibition. Under Wis. Stat. § 703.30(4), when any conflict exists between a declaration and bylaws, the declaration must control. The bylaw amendment abrogates a fundamental property right that was clearly intended and practiced by the declarant, and therefore should be unenforceable.
Analysis:
This decision clarifies the hierarchy and power dynamic within condominium governance in Wisconsin, establishing that bylaws can be used to impose significant use restrictions like rental prohibitions without amending the core declaration. It strengthens the authority of condominium associations to adapt rules based on the will of the supermajority, potentially overriding the investment expectations of individual owners who purchased under different rules. The ruling sets a high bar for what constitutes a "conflict" between bylaws and a declaration, suggesting that a declaration must grant an explicit, affirmative right to prevent a superseding bylaw restriction. This precedent will likely influence future disputes over the scope of an association's power to amend its governing documents.
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