Oct. 7, 2021 – A state appeals court has ruled that a restrictive covenant prohibits Door County landowners from converting their parcel into three, single-family units, concluding that the condominium declaration was an improper land division.

The dispute arose in September 2019. Cottage Row Properties, LLC filed an application for a minor land division with Door County for a 7.44-acre tract that fronted Green Bay. Steven Kane and his wife Jacqueline Kane are the only two members of the LLC.

In 1993, the owners of 54 tracts located along Cottage Row Road in the Town of Gibraltar had executed an agreement creating restrictive covenants (CCRs) for the tracts and recorded the agreement.

The CCRs specified that Tract 54 – the tract at the center of the dispute – contained three houses. Under the relevant covenant, one additional house could be built on Tract 54, but the tract could not be divided to create any additional tracts.

Kanes Attempt to Divide

The Kanes, who purchased Tract 54 in June 2018, knew about the CCRs but thought the restriction on dividing Tract 54 would not apply to the conversion of the tract into a three-unit site condominium. They planned to sell two of the units and build a new single-family residence on the third unit.

A short time after the Kanes filed their application for land division, several people who own other tracts on Cottage Row Road objected to the proposed site condominium in a cease-and-desist letter. The proposed land division would both violate the CCRs and the county’s zoning code, the neighbors wrote, and the Kanes should withdraw the land division and abandon their efforts to divide Tract 54 or create a site condominium there.

The Kanes were unmoved. They filed a condominium declaration and a condominium plat with the country’s register of deeds. The next day, the neighbors sued the Kanes, seeking a preliminary injunction. They later amended their suit to request a declaratory judgment that the proposed land division violated the CCRs.

In a deposition, the Door County zoning administrator testified that under the county’s ordinances, a minor site condominium conversion counts as a land division creating new lots of record. The circuit court relied on that testimony to rule that the Kanes’ proposed condo conversion violated the CCRs, and issued a permanent injunction.

In Nordstrom v. Kane, 2020AP1942 (Sept. 28, 2021), a three-judge panel for the District III Court of Appeals affirmed the circuit court’s decision.

Land Divisions Under State Law

The task before the appellate panel was harmonizing the relevant covenant and statutory provisions from Wis. Stat. chapter. 236, which governs the platting of lands, and chapter 703, which governs condominiums.

The Kanes argued the circuit court’s ruling that the covenant prohibited the condominium conversion was contradicted by Wis. Stat. section 703.37, which reads “[f]or purposes of interpretation of this chapter, a condominium is a form of ownership, not a form of land use, and is not a subdivision defined in ch. 236.”

The court of appeals held that that argument ignores the wording at the beginning of the provision, “[f]or the purposes of interpretation of this chapter.”

That wording means that section 703.37 has no bearing on the interpretation of the covenant at issue, wrote Justice Lisa Stark, the presiding judge.

In any event, the neighbors conceded that the proposed condominium conversion did not constitute a subdivision under ch. 236.

It did, however, constitute a land division for purposes of the covenant, the neighbors argued, and the court held that section 703.37 did not foreclose that interpretation, even if the land division was not a subdivision for purposes of ch. 236.

Land Divisions Under County Ordinance

The court held that under Door County’s zoning ordinance, a “minor” site condominium is considered a land division – a result permitted by provisions of ch. 236.

Furthermore, section 703.37 explicitly allows municipalities to apply subdivision ordinances to condominiums if the ordinance by its express terms applies to condominiums “and the application is reasonably related to the nature of condominium ownership.”

When Door County adopted a land division ordinance, it listed the goals of the ordinance. Among them was to “[e]nsure a system for review of proposed site condominiums that is identical to the review procedures for land divisions. Such review of site condominiums is deemed appropriate because they function in the same manner as, and have the same neighborhood and environmental impacts, as land divisions.”

The court held that the provisions of the county zoning ordinance that govern the creation of minor land divisions and minor site condominiums are almost identical.

So too for the provisions of the zoning ordinance that govern design standards, improvements, and dedications for both minor land divisions and minor site condominiums and the respective provisions of chapter seven of the ordinance, which govern administration and enforcement.

The court of appeals followed the district court’s lead in relying upon the testimony of the county’s zoning administrator.

“His unrefuted testimony therefore supports a conclusion that the condominium conversion at issue in this case violated the 1993 restrictive covenants by dividing Tract 54 into additional tracts,” Judge Stark wrote.

Precedent and Subjective Intent

The Kanes also argued that they had precedent on their side.

In FAS, LLC v. Town of Bass Lake, 2007 WI 73, 301 Wis. 2d 321, 733 N.W.2d 287,the state supreme court stated that it could find no authority to support the contention that a condominium declaration constituted a land division, as opposed to merely a change in the form of ownership of the land.

However, Judge Stark wrote, the supreme court in that case acknowledged that it was merely noting the absence of such authority, and “the FAS court’s discussion of whether a condominium declaration constitutes a land division was formulated without the court having considered arguments developed by the parties on that issue.”

The court was no more sympathetic to the Kanes’ reliance on Herman v. County of Walworth, 2005 WI App 185, 286 Wis. 2d 449, 703 N.W.2d 720.

In that case, the court of appeals held that the granting of a CUP to build two condominiums on separate lots was not a land division.

But the only question before the county in that case was whether the proposed use on the separate lots was an appropriate condition use.

“Unlike Herman, this appeal does not involve a CUP application; rather, it involves the creation of a minor site condominium through the recording of a condominium declaration and plat,” Judge Stark wrote.

The Kanes also argued that by referencing “the very nature and spirit of the 1993 Covenants,” the circuit court had impermissibly grounded its ruling in the subjective intent of the covenants’ drafters.

Supreme Court precedent requires Wisconsin courts to look to the “‘scope and purpose of the covenant as manifest by the language used,’” Judge Stark wrote.

But regardless of the circuit court’s mention of the “nature and spirit” of the 1993 CCRs, “its decision was clearly based on the restrictive covenants’ unambiguous language stating that Tract 54 ‘may not be divided so as to create any additional tracts therefrom.’”