Michigan Court of Appeals holds that HOA cannot revoke approvals for docks

In Haan v Lake Doster Lake Association, unpublished opinion of the Court of Appeals, issued January 16, 2020 (Docket No. 345282), the Michigan Court of Appeals held in a 2-1 decision that an Allegan county homeowners association could not revoke approvals granted to owners to install docks.  The majority opinion relied on the terms of a membership application for the owners that expressly stated that members were permitted to “…continue all past permitted rights” in holding that prior oral approvals under the architectural control restrictions in the covenants were not revocable.  The dissenting opinion argued that the restrictive covenants provided a procedure for owners to obtain permission to construct a dock, which could later be revoked, and that the covenants could not be amended by representations made in the membership application.  This case demonstrates the importance of a homeowners association putting architectural control approvals in writing and specifying whether the approval is revocable.

Facts

The Lake Doster Development Company created Lake Doster, a man-made lake in Allegan County, and developed the surrounding property in the 1960’s. The subdivision plat included a dedication of a lakefront parcel for lot owners without lake frontage (the “backlot owners”).  The developer recorded restrictive covenants, some of which governed the installation of docks. If a lot owner wished to install a dock, they were required to obtain approval from the developer’s architectural control committee. The original backlot owners obtained permission to install docks and moor their boats to the docks in specific locations.  The backlot owners maintained the docks over the years, and when the backlots were sold, the dock connected to each lot was transferred.
The Lake Doster Lake Association (the “LDLA”) was formed in 2005 for the purpose of administering and governing the rights and responsibilities of subdivision lot owners. The developer conveyed its property rights and interests in Lake Doster and the subdivisions to the LDLA, which included ownership of the lake, the lake bottom and the land to the high watermark of the lake.  The developer also assigned the LDLA its rights to permit or restrict use of the lake and parks and its dock and mooring rights.
The LDLA had a unique admissions process.  Rather than simply automatically admitting members based on the acquisition of a lot, the homeowner association required membership applications.  The applications had the following pertinent terms:

The Applicant desires the Property’s present and future owners to have access and use of certain lands owned by the Association, including but not limited to, Lake Doster, … the private drive known as Parkway Drive and the private park[ ] known as Parkway …. To that end, the Applicant hereby agrees and acknowledges that upon admission and receipt of membership, this instrument shall be recorded with the Allegan County Register of Deeds and all previous rights and interests of all kinds and nature enjoyed by the Applicant in the Association Property shall be relinquished and quitclaimed to the Association. Upon acceptance of this Application for Membership …, the Association agrees to allow the Applicant and all future owners of the Property to continue all past permitted rights of the Association Property, provided that the Applicant and all future owners of the property abide by the Bylaws, Plat Restrictions and all rules and regulations adopted by the Association from time to time. Title to the Association Property shall at all times remain vested in the Association subject to the rights of use and enjoyment provided above and granted elsewhere to other Members of the Association.

Plaintiffs were a group of backlot owners that had executed membership applications. In 2015, the homeowners association contacted the plaintiffs and informed them that certain docks would need to be removed, added, adjusted and realigned.  Plaintiffs did not want to move their docks and filed a lawsuit arguing that they had vested rights to maintain their previously approved docks.  The trial court ruled in favor of the LDLA as it determined that it owned the lake, lake bottom, surrounding land and that it had exclusive riparian rights in relation to the lake.  The trial court further held that the homeowners association had only granted a license to “use” the docks, that the covenants permitted the LDLA to regulate the docks through its architectural control process and that the membership application agreement conveyed no property rights and was silent as to the docks. However, as discussed below, the plaintiffs prevailed on appeal.

Majority Opinion

 The majority opinion focused on the fact that the membership applications were agreements that were recorded in the Allegan County Register of Deeds that expressly permitted the members of the homeowners association  “to continue all past permitted rights.” The majority held that application was an enforceable contract, but that even if the membership agreement was not a contract, that promissory estoppel would still apply to prevent the LDLA from revoking any rights that it had previously granted with respect to the docks.
The majority opinion also concluded that the subdivision plan provided the backlot owners an easement to access and use the lake.  The majority opinion acknowledged that even though the plat was silent as to the docks, the recorded restrictive covenants permitted the installation of docks after approval from the architectural control committee.  The court found informal approval sufficed under the covenants to install a dock to the lake bottom, and that these approvals were valid even though the LDLA had no written records of approving dock installations.  Specifically, the majority stated:

We view the approvals by the developer or LDLA as expanding the existing use and access easements originally created by the plat dedication to now encompass the erection and maintenance of those approved docks….Accordingly, when requests by subdivision backlot owners to erect docks on Lake Doster were approved, those owners acquired an easement interest or right in relation to erecting and maintaining their respective docks.

The majority opinion rejected the fact that the permission to use the docks was a license.  The majority reasoned:

LDLA argues that the dock-construction approvals created, at most, oral licenses that were not permanent and could be revoked at will. A license arises when the owner of land gives permission to another person to do some act on the land without that person acquiring any permanent interest in the owner’s land; “a license is revocable at will and is automatically revoked upon transfer of title by either the licensor or licensee.” Kitchen v Kitchen, 465 Mich 654, 658-659; 641 NW2d 245 (2002). Here, the very history of the subdivision and the treatment of the docks established that more than mere licenses had been granted, otherwise, every time a backlot that had a dock was conveyed, the new owner would have been required to seek and obtain approval anew to retain dock privileges. Instead, backlots were conveyed along with the docks connected to them: the docks were appurtenant to the lots. We also note that even if mere licenses were created when permission was given to erect and maintain docks, the “past permitted rights” provision in the membership agreements allowed the applicants “and all future owners” to continue exercising such rights, which would have effectively converted the licenses into written easements.

Accordingly, after determining that the backlot owners had an easement, the majority analyzed whether the LDLA’s plan to rearrange the docks was inconsistent with the backlot owners’ easement rights.  The court held that the implantation of the LDLA’s dock plan would interfere with the “past permitted rights” in the membership agreements as it would result in a loss of use or change in location of certain docks.  The majority opinion concluded with stating that:

…we are not holding that LDLA cannot engage in any regulation and oversight of appellants’ docks, as reflected by our flotation-device example. Although appellants remain subject to the bylaws, plat restrictions, and properly adopted rules and regulations, LDLA cannot employ those authorities and mechanisms to essentially eviscerate and render meaningless its agreement to allow subdivision backlot owners to continue enjoying their past permitted rights to maintain their docks. We have concluded that the dock plan’s requirement that appellants share docks sufficiently impairs or interferes with existing dock easement rights such that the dock plan cannot be sustained and implemented. LDLA’s future actions and plans will have to be examined on a case-by-case basis to assess whether they conflict with the membership agreement and easement rights to maintain docks.

Dissenting Opinion

The dissenting opinion held that the membership application was an enforceable contract but that the ability to use or place a dock remained subject to the covenants.  Specifically,

“Erecting or maintaining a dock near the water’s edge is a riparian or littoral right.” Dyball v Lennox, 260 Mich App 698, 705; 680 NW2d 522 (2004). A riparian owner owns land abutting a river, and riparian rights are the riparian owner’s rights to make use of water in the waterway adjoining his or her property. Little v Kin (Little I), 249 Mich App 502, 504 n 2; 644 NW2d 375 (2002), aff’d 468 Mich 699 (2003). Reservation of a right-of-way for access to a waterway does not give rise to riparian rights, but only a right-of-way. Thompson v Enz, 379 Mich 667, 685; 154 NW2d 473 (1967)….Although “Michigan law clearly allows the original owner of riparian property to grant an easement to backlot owners to enjoy certain rights that are traditionally regarded as exclusively riparian,” Dyball, 260 Mich App at 706, such as the right to erect and maintain docks and permanently moor boats, the grant must be within the scope of the easement, Thies, 424 Mich at 293, 295.The plain language of the easement granted plaintiffs a right-of-way to access Lake Doster and use the surface of Lake Doster for reasonable lake and water activities. However, the easement did not grant them the right to erect and maintain docks.

The dissent reasoned that since the developer conveyed its riparian rights to the homeowners association, that the LDLA had the sole authority to control the dock installations.  The dissent stated that the restrictive covenants only created a mechanism for owners to obtain permission to install a dock, but that the covenants “…did not create a property interest or legal right to indefinitely keep and maintain a dock.”  The dissent stated that the membership application required the owners to abide by the plat, restrictive covenants, bylaws and rules and regulations of the homeowners association, which included the LDLA’s “…authority to oversee and regulate the use and access to Lake Doster for the benefit of all property owners.”  Accordingly, the dissent would have held that since the installation of docks was not expressly included within the language of the easement, that the backlot owners did not have any permanent or irrevocable rights to keep the docks and that the LDLA retained the ability to remove docks under the covenants.

Conclusion

This case presented a unique factual scenario as most homeowners associations do not have written membership applications that are recorded in the register of deeds.  In most homeowners associations, membership is automatically established when an owner receives a deed to the property.  However, this case is noteworthy as it establishes that an oral grant of permission by an architectural control committee may ripen into a permanent easement right in certain circumstances.  However, in many cases, the restrictive covenants will require written permission or some form of a written modification agreement.  In providing such written permission, it is important for a homeowners association to indicate whether the grant of permission is permanent or revocable.  In the instant case, if the homeowners association had provided written approvals related to the installation of the docks, and expressly indicated that the approvals were revocable, the homeowners association would have likely won this case.  
Kevin Hirzel is the Managing Member of Hirzel Law, PLC and concentrates his practice on commercial litigation, community association law, condominium law, Fair Housing Act compliance, homeowners association and real estate law. Mr. Hirzel is a fellow in the College of Community Association Lawyers, a prestigious designation given to less than 175 attorneys in the country. He has been a Michigan Super Lawyer’s Rising Star in Real Estate Law from 2013-2019, an award given to only 2.5% of the attorneys in Michigan each year. Mr. Hirzel has been named a Leading Lawyer in Condominium & HOA law by Leading Lawyers Magazine in 2018 and 2019, an award given to less than 5% of the attorneys in Michigan each year. He represents community associations, condominium associations, cooperatives, homeowners associations, property owners and property managers throughout Michigan. He may be reached at (248) 478-1800 or [email protected]