During a secret meeting last month, the board of a condo association in New Canaan adopted overly restrictive leasing rules in a way that violates state law as well as the organization’s own governing documents, according to a new lawsuit.
The Oenoke Association failed to notify owners at the 164-unit brick condo complex on Heritage Hill Road of proposed new rules as per a state law that requires such an executive board to provide at least 10 days prior to “adopting, amending or repealing any rule” and informing those owners just which day it will act, according to a lawsuit filed Oct. 11 on behalf of a New Canaan man’s company.
Captain Jack LLC, whose principal is Thomas Hudson of West Road, has purchased 23 condos and 11 garages at Oenoke Condominium since the beginning of last year, according to a complaint filed in state Superior Court by attorney Ronald Barba of North Haven- based Bender Anderson and Barba P.C., a law firm whose website is CondminiumLawyers.net.
Records show that the company has paid more than $6.7 million in making the acquisitions. The activity has concerned some of the condo owners. Realtors commenting on NewCanaanite.com have cautioned that if one party owns more than 10 percent of all units, the complex itself becomes unwarrantable with regard to conventional lending. As a result, owners may have difficulty selling to buyers with conventional mortgages, and that could put one party in a position to force down prices if the only potential buyers are all-cash, Realtors have cautioned.
Last year, the condo association “purporting to institute leasing restrictions,” according to the complaint, that would: limit the percentage of rentals to a level meeting “the underwriting requirements of institutional lenders who routinely purchase or insure first mortgages on units in Common Interest Communities”; require that all leases of rental units be filed with the association’s executive board requesting its approval in writing; restrict owners’ rights to rent upon the expiration of their leases; and authorize the board to prohibit further rentals upon the escalation of the percentage of rentals within 5 percent of the “Minimum Owner Occupancy Rate.”
Yet the rules aren’t effective without a two-thirds majority vote from unit owners or written approval from more than half of eligible mortgagees, the lawsuit said—standards the board hasn’t met.
Last month, the condo association’s board notified unit owners of its intention to rescind leasing restrictions and, on Sept. 25, voted to replace them with the new rules, according to the complaint.
“The leasing restriction contemplated in the proposed new rule sought to limit the percentage of rental units at the Oenoke Condominium at 45 percent or 74 units,” according to the complaint—a figure that “exceeds the limits contemplated” in state laws and “more restrictive than the most restrictive requirements of Fannie Mae and Freddie Mac.”
It also requires a “welcome interview” for new tenants “despite the fact that the governing documents provide no authority for such an interview,” according to the lawsuit. It “authorizes it to charge fees for each rental and an annual waiting list fees without justifying the need or expense,” it said.
“The rule adopted by the Oenoke Board is arbitrary in its application and inequitable to investors at Oenoke,” according to the complaint.
On Sept. 18, the condo association board had “held an ‘informational meeting’ with unit owners to discuss the proposed rule ahead of its scheduled and noticed Sept. 28, 2017 executive board meeting at which the rule adoption was to be taken” by the board, according to the lawsuit.
Yet “rather than holding the Board vote the Sept. 28, 2017 meeting, the Defendant Board surreptitiously held a vote several days prior adopting the New Rule,” the complaint said.
It was recorded in New Canaan land records Sept. 26.
“Prior to voting to adopt to the New Rule, the board made unilateral changes to the language in the Rule provided to the unit owners and eligible mortgagees without advising either of the altered language,” the lawsuit said.
“By adopting the New Rule over the objections of the registered eligible mortgagees as it did, the Defendant willfully violated the provisions of” its own governing documents, according to the complaint.
“The actions taken by the Defendant in direct contravention of its governing documents constitute a willful violation of the Common Interest Ownership Act for which the Plaintiff seeks attorney’s fees and costs.”
Captain Jack LLC is seeking for the court to render the leasing restrictions “invalid and unenforceable” as well as “a declaratory judgment finding that the defendant acted in bad faith by opting to secretly vote on the New Rule prior to the date contained in its notice to unit owners” in violation of state law.
The company is seeking a permanent injunction and unspecified monetary damages.
According to an Oct. 20 order, the Oenoke Association must appear in court Nov. 13 “to show cause why a temporary injunction should not issue against it as prayed for in the foregoing complaint and application.” A status conference is scheduled for that day, according to Connecticut Judicial Branch records.
It isn’t clear what Captain Jack LLC paid for its three most recently acquired units at the condo complex, since town tax records indicate zero-dollar sales. In April, the company put an estimated $58,946 into installing 71 vinyl replacement windows throughout seven of the Oenoke Association units, according to building permits. In July, Captain Jack LLC received permits to install 22 windows in two more units, for a total of $9,761.90.
Captain Jack LLC-Acquired Heritage Hill Road Condos
| Unit | Selling Price | Property Transfer Date |
|---|---|---|
| 62C | $435,000 | Jan. 27, 2016 |
| 83A | $362,500 | June 2 |
| 64C | $275,000 | June 14 |
| 72B | $354,000 | July 8 |
| 167A | $382,500 | July 8 |
| 76B + garage | $325,000 | Aug. 10 |
| 86 + garage | $450,000 | Aug. 10 |
| 66A + garage | $300,000 | Aug. 31 |
| 80C | $300,000 | Aug. 31 |
| 61 + garage | $495,000 | Sept. 23 |
| 151A | $300,000 | Dec. 29 |
| 132C | $320,000 | Jan. 25, 2017 |
| 88A | $350,000 | Feb. 2 |
| 82D | $375,000 | Feb. 8 |
| 140B | $300,000 | Feb. 16 |
| 76D | $320,000 | Feb. 17 |
| 81C | $300,000 | Feb. 17 |
| 108B + garage | $455,000 | Feb. 17 |
| 70B | $330,000 | Feb. 21 |
| 62B | NA | March 24 |
| 82B | NA | June 21 |
| 136B | NA | June 30 |
| Total | $6,724,000 |