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Association Liable For
Architectural Violations
 The Court of Appeal handed down another decision. The case involves an HOA board that approved a construction project which
violated the association's architectural guidelines. In addition, the board failed to monitor
the project they approved.
Construction Project. Homeowner
Daniel Lass submitted
plans to the Sagewood Homeowners Association to combine two condominiums
into a single unit, convert a carport into a garage and convert ~1,000
square feet
of common area to his personal use.
Conditional Approval.
The board gave Lass approval subject to the following major conditions:
(i) obtaining building permits; (ii) depositing a $5,000 performance
bond with the HOA; (iii) executing a maintenance and hold harmless
agreement protecting the HOA, (iv) receiving approval of at least 67% of
the membership.
Violations. None of the conditions were
met prior to construction and the board took no action to enforce them.
To make matters worse, Lass assured his neighbors the project would take
no more than six months to complete but then took two years during
which his neighbors were subjected to noise, fumes and dust on weekdays,
weekends, holidays and evening hours.
Board Inaction. One
neighbor, Ted Telford, repeatedly informed the HOA of the violations
but the board took no action. When finally completed, the project varied
materially from the approved plans and again the board took no action.
Lass was alleged to have a personal and business relationship with the
board president.
Lawsuit Filed. Telford sued alleging the
Association had a duty to the owners to act in good faith and with
reasonable prudence in approving Lass’s construction project and a duty
to ensure that Lass complied with the governing documents.
Decision. The Court ruled as follows:
1. Owner's Right to Enforce. When
an association fails or refuses to enforce its CC&Rs, homeowners
can sue for damages and compel the
association to enforce the covenants.
2. Business Judgment Limited. Although decisions of the board are granted deference under the business judgment rule, deference is accorded only if the association
acts upon reasonable investigation in good faith with regard for the
best interests of the association and its members. Accordingly, the
board had a duty to
monitor the project once it was approved.
3. Consistent with CC&Rs. Boards must exercise their authority to approve architectural improvements in conformity with the CC&Rs and
they must do so in good faith, consistent with their fiduciary obligations to homeowners.
4. Exculpatory Clause.
The association argued that the CC&Rs expressly exempted the
association from liability resulting from the approval of any
construction plans or the performance of any work whether or not
pursuant to approved plans. The court concluded that the exculpatory
clause did not relieve the association from liability for the board's
breach of its fiduciary duties.
RECOMMENDATION: Although the court's decision is unpublished,
its reasoning is consistent with other cases. Boards have discretion in
how they enforce their documents but the clear message is that boards
must investigate and take some form of good faith action. They cannot
sit on their hands and do nothing. This was the same message given by
the court in the Affan v. Portofino Cove case where the board failed to investigate and take action to fix a sewer line. To read more, see Telford v. Sagewood HOA.
OUT OF CONTROL BOARD
 QUESTION:
I love your website, however our property manager says the website is
just your interpretation of the Davis-Stirling Act and therefore
anything homeowners find on it cannot be used. We have a board that
engages in illegal electioneering and misuses our funds, and exceeds the
5% max for spending without a vote all of the time, they are out of
control and the property management company just ignores us.
ANSWER:
It is true that some of the information on the website includes my
opinions. However, that does not mean the information is useless.
Regarding the management company ignoring you, it is possible they have
been directed by the board to not respond to members. It sounds like the
membership needs to take action.
SMALL CLAIMS
COLLECTION MATTERS
QUESTION:
We are filing small claims action against a homeowner who
has not paid HOA dues. As the amount is heading over
the $5,000 limit, can we file another suit to collect money that is not included in the last suit? Can we keep using
small claims for ongoing dues?
ANSWER:
Yes, you can keep going to small claims but with limitations. You can
file only two claims in a calendar year that ask for more than $2,500
but you can file as many claims as you want for up to $2,500 each. Code Civ. Proc. §116.231.
Smaller Bites. If the delinquent owner is $7,000 in arrears, small claims limits HOAs to a recovery of $5,000.
The board must either waive everything over $5,000 or limit their
claim. For example, if the owner is nine months in arrears (January
through September) for a total of $7,000, the board sues in small claims
for six months (January through June) which brings it under the $5,000
limit. Once the board has a judgment for the first six months, the
association can go back to small claims for July through September,
which is under $2,500. The board then files as-needed as delinquent
amounts approach the $2,500 limit. In addition, the board should be
recording abstracts of judgment to secure the debt in the event the owner declares bankruptcy.
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Adams Kessler PLC. Readers should not act on issues raised in our newsletters or website without consulting legal counsel. |
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