The Perils of Primacy: Successor Liability for Lenders Turned Declarants in Louisiana Common Interest Communities

• Author: Christopher K. Odinet
• Position: Assistant Professor of Law, Southern University Law Center
• Pages: 777-838

The Perils of Primacy: Successor Liability for Lenders

Turned Declarants in Louisiana Common Interest

Communities

Christopher K. Odinet∗

TABLE OF CONTENTS

Introduction ............................................................................. 778

I. Declarations and Real Estate .................................................. 784

A. Micro-governments ........................................................... 785

B. Declarations and Power .................................................... 788

C. Lending and Control ......................................................... 791

II. Collateralizing Control ............................................................ 797

A. Under Mortgage Law—Immovable Aspects of CCRs .... 797

B. Under UCC Article 9—Movable Aspects of CCRs ........ 804

C. Under the Law of Pledge—Gap Filling ........................... 808

III. Successor Declarants and Liability in Louisiana ................... 812

A. Under Assignment and Assumption Principles ............... 813

B. Under Servitudes and Building Restrictions .................... 818

C. Under Corporate Law Theories ........................................ 822

IV. Fairness and Flexibility: Critiques and a Proposed

Solution .................................................................................... 825

A. A Critique of State Doctrinal Possibilities ....................... 825

B. The Community Regime Approach ................................. 827

1. Deficiencies in Current Statutory Frameworks ......... 827

2. The Uniform Common Interest Ownership Act ........ 829

Copyright 2014, by CHRISTOPHER K. ODINET.

∗ Assistant Professor of Law, Southern University Law Center. B.A.,

Louisiana State University A. & M. 2007; J.D./G.D.C.L., Paul M. Hebert Law

Center, Louisiana State University. The author thanks the editors of the Louisiana

Law Review for their gracious invitation to participate in this Louisiana-themed issue,

as well as Michael Rubin, James Stuckey, David Cromwell, Randy Roussel, and

Professors Missy Lonegrass, Randy Trahan, Andi Carroll, John Lovett, and Dian

Tooley-Knoblett for their invaluable comments and advice. Lastly, the author thanks

Chancellor Pitcher of the Southern University Law Center for his continued support

of faculty schol arship. The views a nd conclusions conta ined herein and any errors are

the author’s alone.

778 LOUISIANA LAW REVIEW [Vol. 74

a. Liability for Original Declarants Under

the UCIOA ............................................................ 831

b. Liability for Successor Declarants Under

the UC IOA ............................................................ 832

3. A Call for Reform ....................................................... 834

Conclusion ............................................................................... 835

INTRODUCTION

In surveying the landscape of American real estate, it is

increasingly difficult—if not impossible—to find a development or

community that is not part of or subject to a larger, comprehensive, and

common-interest plan.1 Whether one is strolling through the av enues of

a mixed-use development after finishing dinner and a long day of

shopping or driving down the manicured, tree-lined streets past rows of

uniform, w rought-iron mailboxes in a residential neighborhood, care ful

planning and coordination went into making these developments

possible.2 And this careful planning and coordination were not merely

the result of one-time efforts; rather, a complex and detailed legal

regime underpins the entire development to ensure that the order,

quality, and aesthetic of the project continue into the future.3

These types of developments, which have come to dominate nearly

all real estate development in the United States, are known as

“common interest communities.”4 The idea behind the common

interest community concept is to create developments whereby the

1. See Patrick K. Hetrick, Drafting Common Interest Community Documents:

Minimalism in an Era of Micromanagement, 30 CAMPBELL L. REV. 409 (2008);

Harvey Rishikof & Alexander Wohl, Private Communities or Public Gove rnments:

“The State Will Make the Call”, 30 VAL. U. L. REV. 509, 521 (1996); David J.

Kennedy, Residential Associations as State Actors: Regulating the Impact of Gated

Communities on Nonmembers, 105 YALE L.J. 761, 763 (1995).

2. See Katharine Rosenberry, The Application of the Federal and State

Constitutions to Condominiums, Cooperatives and Planned Developments, 19 REAL

PROP. PROB. & TR. J. 1, 20 (1984); James W. Torke, What Pric e Belonging: An Essay

on Groups, Community, and the Constitution, 24 IND. L. REV. 1 (1990); ROBERT JAY

DILGER, NEIGHBORHOOD POLITICS: RESIDENTIAL COMMUNITY ASSOCIAT IONS IN

AMERICAN GOVERNANCE 62 (1992).

3. See EVAN MCKENZIE, PRIVATOPIA: HOMEOWNER ASSOCIATIONS AND THE

RISE OF RESIDENTIAL PRIVATE GOVERNMENT 140 (1994); Gregory S. Alexander,

Dilemmas of Group Autonomy: Residential Associations and Community, 75

CORNELL L. REV. 1, 23 (1989); Frank Michelman, Universal Resident Suffrage: A

Liberal Defense, 130 U. PA. L. REV. 1581 (1982).

4. See Wayne S. Hyatt, Common Interest Communities: Evolution and

Reinvention, 31 J. MARSHALL L. REV. 303, 305 (1998).

2014] SUCCESSOR LIABILITY FOR DECLARANTS 779

owners or occupants share common responsibilities with regard to the

upkeep, maintenance, and expenses of the development as a whole.5

Moreover, these developments are typically structured so as to ensure

that a certain level of beauty, quality, and visual appeal is maintained

even after the developer no longer owns any part of the community.6

Governance of the community is assumed by an association, the board

of which is made up of the elected owners of the lots or units within

the development.7 And, with the ability to charge each owner an annual

assessment, the association is able to maintain funds for the repair,

replacement, and enhancement of the community over time.8 The

common interest community framework is seen in almost all forms of

property-r elated projects, incl uding condominium complexes, housing

developments, vacation timeshares, and many mixed-use projects.9

Through this framework, the various owners/occupants of the

development can enjoy amenities—such as a community park, tennis

court, or swimming pool—that would otherwise be too expensive for

any individual owner/occupant to afford on his or her own.10

The first comm on interest communities came into existence around

the period from 1910 to 1935 in the form of simple homeowners’

5. See Wayne S. Hyatt & Jo Anne P. St ubblefield, The Iden tity Crisis of

Community Associations: In Search of the Appropriate Analogy, 27 REAL PROP.

PROB. & TR. J. 589, 698 (1993); Shirley L. Mays, Privatization of Municipal

Services: A Contagion in the Body Politic, 34 DUQ. L. REV. 41, 57 (1995).

6. See Murphy v. Timber Trace Ass’n, 779 S.W.2d 603, 608 (Mo. Ct. App.

1989) (holding in favor of a restrictive covenant because the court thought that “the

public policy the Uniform Condominium Act [is] in favor of the social benefits of

planned community developments”); Justin D. Cummins, Recasting Fair Share:

Toward Effective Housing Law and Principled Social Policy, 14 LAW & INEQ. J. 339,

347–48 (1996) (showing that community associations can stabilize and mobilize

social resources for advancement, but people in low-income, central-city

communities are socially isolated from the community association); William C.

Jensen & Cynthia L. McNeill, Colorado Common Interest Ownership Act—How It Is

Doing, 25 COLO. LAW. 17, 17–18 (1996) (showing that the unit owner’s association is

responsible for the “social cohesiveness of its owners”).

7. See RESTATEMENT (THIRD) OF PROP.: SERVITUDES § 6.16 (2000); see also

Susan F. French, Making Common Interest Communities Work: The Next Step, 37

URB. LAW. 359, 362 (2005).

8. See Paula Franzese, Privatization and Its Discontents: Common Interest

Communities and the Rise of Government for “the Nice”, 37 URB. LAW. 335 (2005).

9. See RESTATEMENT (THIRD) OF PROP.: SERVITUDES § 6, introductory cmt.

(2000); see also Hyatt, supra note 4.

10. See Todd Brower, Communities Within th e Community: Consent,

Constitutionalism, and Other Failures of Legal Theory in Residential Associations, 7

J. LAND USE & ENVTL. L. 203, 204 (1992); Government by the Nice, for the Nice,

ECONOMIST, July 25, 1992, at 25; see also SETHA LOW, BEHIND THE GATES: LIFE,

SECURITY, AND THE PURSUIT OF HAPPINESS IN FORTRESS AMERICA 153–73 (2003).