A recent decision by the Missouri Court of Appeals addresses the tricky situation where a subdivision, unable to supply an amenity in sufficient quantity and quality to all of the lot owners, makes construction of new homes expressly conditioned on those lot owners declining use of the amenity, both then and in the future, only to later decide to improve the amenity and impose a levy for a special assessment on all lot owners, including those who cannot use the amenity by the very terms of the agreement with the subdivision.
The background to the case involved an older subdivision that owned its own water delivery system for the lots within the subdivision. The subdivision’s association had acquired the water system from the developer around 1990, but the subdivision was about 50 years old at that time. In 1996, one lot owner and his family purchased an existing home within the subdivision, but over the course of the next 10 years experienced a variety of problems with their water, including low water pressure, breaking water pipes and discolored water. As a result of those problems, that lot owner dug a private well and disconnected from the subdivision’s water system.
Two other lot owners purchased lots, one in 1996 and the other in 1999, on which each lot owner and his or her family wanted to build new homes. The subdivision association conditioned approval of the building plans on the respective lot owners’ agreements “that they would never connect to the subdivision’s water delivery system.”
In 2007, the association’s Board of Trustees, confronted with continuing problems with its water system, gained approval in accordance with the subdivision’s indenture on its proposal to replace the private water system and transfer control of the new water system to the county’s water system. The association then proceeded to levy a special assessment, $2,000 for each lot within the subdivision, and an additional $1,750 for lots that were connected to the subdivision water system.
The three affected lot owners cried foul and filed suit to have the association’s actions in levying the special assessments declared invalid as applied against them. The trial court’s decision, upheld on appeal, held that while the association had the authority to levy the special assessment, the special assessment was null and void as applied against the three lot owners.
The court acknowledged Missouri law on the issue of the varying degrees of benefits from special assessment, reiterating that the special assessment levied against the property owner is not objectionable on grounds that the property owner receives a reduced benefit when compared to others subject to the same assessment. The court went on to note, however, that courts in Missouri have the authority to deny imposition of a special assessment against property owners based upon principles of equity. The court then found substantial evidence to support the proposition that equity required the special assessment not be imposed on the three lot owners. The court held that the association had expressly denied two of the lot owners’ access to the subdivision’s water delivery system, while the third lot owner was constructively made to leave the water system due to the poor condition of the system, and in all three cases the lot owners had to dig the private wells at their own expense.
Although the lot owners who brought the lawsuit prevailed in not having to pay a special assessment for a benefit from which they would not benefit, the court did hold that the lot owners would be required to pay the sum of $2,000 to the association for recoupment of infrastructure costs should they connect to the water delivery system in the future.