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DUTY TO ENFORCE DOCUMENTS

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Duty to Investigate & Enforce. Associations have a duty to investigate complaints by residents of rules violations. If a violation exists, associations have a duty to enforce its governing documents. (Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 373-374, 380-383.) The enforcement of CC&Rs must be "in good faith, not arbitrary or capricious, and by procedures which are fair and uniformly applied." (Liebler v. Point Loma Tennis Club (1995) 40 Cal.App.4th 1600, 1610; Nahrstedt, supra, 8 Cal.4th at p. 383; Cohen v. Kite Hill Community Assn. (1983) 142 Cal.App 3d 642, 650-652.) "This statutory presumption of reasonableness requires that recorded covenants and restrictions be enforced "'unless they are wholly arbitrary, violate a fundamental public policy, or impose a burden on the use of affected land that far outweighs any benefit.'" (Market Lofts v. 9th Street Market Lofts.) 

Standing. Associations and members both have standing to litigate enforcement of CC&Rs. Tenants and non-members do not. See "Legal Standing."

CC&Rs Presumed Reasonable. An association's CC&Rs shall be enforceable equitable servitudes, unless unreasonable. (Civ. Code § 5975.) Use restrictions contained in a recorded declaration are afforded a "presumption of validity" and are enforced unless found unreasonable under a deferential standard. (Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 372, 383.) Whether CC&Rs are reasonable is determined not by reference to facts that are specific to the objecting homeowner but by reference to the common interest development as a whole. Restrictions contained in CC&Rs are presumed reasonable and will be enforced unless the restriction:

  1.  Is arbitrary,
  2.  Imposes burdens on the property that substantially outweigh the restriction's benefits to the development's residents, or
  3.  Violates a fundamental public policy. (Nahrstedt v. Lakeside Village)

CC&R provisions are presumptively valid and the burden of proving otherwise rests on the challenging owner. (Villa De Las Palmas v. Terifaj.) Also, because CC&Rs are recorded, members are deemed to have knowledge of the restrictions whether or not they received them in escrow or whether or not they read them.

Rules Not Presumed Reasonable. Rules and regulations adopted by a board are not given the same presumption of reasonableness as are CC&Rs. (Dolan-King v. Rancho Santa Fe.) Whether a rule is reasonable is to be determined not by reference to facts that are specific to the objecting homeowner but by reference to the common interest development as a whole. The same test of reasonableness used for CC&Rs is used for rules, i.e., rules should be enforced unless they are wholly arbitrary, violate a fundamental public policy, or impose a burden on the use of affected land that far outweighs any benefit. (Sui v. Price.) To be enforceable, operating rules must meet the following criteria (Civ. Code § 4350):

  1. The rule is in writing.
  2. The rule is within the authority of the board conferred by law or by the declaration, articles of incorporation or association, or bylaws of the association.
  3. The rule is not in conflict with governing law and the declaration, articles of incorporation or bylaws of the association. (Ekstrom v. Marquesa.) 
  4. The rule is adopted, amended, or repealed in good faith and in substantial compliance with the requirements of this article.
  5. The rule is reasonable.

Because rules are not recorded, they must be distributed to owners to be effective.

Discretion to Enforce. Although a homeowners’ association has discretion to decide whether, and in what manner, to enforce the governing documents, this discretion must be exercised consistent with its fiduciary duties and the plain language of the CC&Rs. (Ekstrom v. Marquesa at Monarch Beach Homeowners Assn. (2008) 168 Cal.App.4th 1111, 1121-25; Ritter & Ritter, Inc. Pension & Profit Plan v. The Churchill Condominium Association (2008) 166 Cal.App.4th 103, 122; Posey v. Leavitt (1991) 229 Cal.App.3d 1236, 1247; Lamden v. La Jolla Shores Clubdominium Homeowners Assn (1999) 21 Cal.4th 249, 268.) Associations can enforce restrictions through monetary penalties, suspension of privileges and legal action for injunctive relief. 

Litigation Not Mandatory. Boards have discretion when it comes to the decision to litigate to enforce governing documents. Boards can weigh the cost of litigation, the gravity of the violation, and the likely outcome of the litigation, and make a good faith determination to litigate or not to litigate a particular violation. (Beehan v. Lido Isle.) See Enforcement Flowchart.

Judicial Deference. 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.

Failure to Enforce. When an association fails or refuses to enforce its CC&Rs, members can sue the association for damages and compel it to enforce the covenants. (Affan v. Portofino Cove: the board failed to investigate and take action to fix a sewer line; Telford v. Sagewood HOA: a board approved a construction project that violated the association's architectural guidelines and then failed to monitor the project they approved.)

Follow HOA Procedures. In addition to showing a violation of a restriction, an association must show that it has followed its own standards and procedures prior to pursuing such a remedy, that those procedures were fair and reasonable and that its substantive decision was made in good faith, and is reasonable, not arbitrary or capricious. (Ironwood v. Solomon.)

Loss of Right to Enforce. If a board fails or refuses to enforce a restriction, the association can lose its right to enforce the restriction.

  1. Laches is based on the theory that equity aids the vigilant and not those who procrastinate when it comes to exercising their rights. If a person is slow to assert a right or claim such that the lapse of time harms the other party, the person may lose that right. "The defense of laches requires unreasonable delay plus either acquiescence in the act about which plaintiff complains or prejudice to the defendant resulting from the delay." (Pacific Hills HOA v. Prun.)
  2. Waiver is the knowing, intentional relinquishment or abandonment of a known right or privilege. (Habitat Trust for Wildlife, Inc. v. City of Rancho Cucamonga (2009) 175 Cal.App.4th 1306, 1320.) “The right to enforce a restrictive covenant may be deemed generally waived when . . . ‘substantially all of the landowners have acquiesced in a violation so as to indicate an abandonment.’ ” (Alfaro v. Community Housing Improvement System & Planning Ass'n., Inc. (2009) 171 Cal.App.4th 1356, 1380.) However, failure to enforce one or even a few violations is not sufficient to deem a restriction unenforceable. (Kapner v. Meadowlark Ranch Ass 'n (2004) 11 6 Cal.App.4th 1182, 1190.)
  3. Estoppel may be found where the party to be estopped has by false language or conduct led another to do that which he or she would not otherwise have done and as a result thereof that he or she has suffered injury. (Steinhart v. County of Los Angeles (2010) 47 Cal.4th 1298, 1315.) Thus, “the party asserting [estoppel] must be ignorant of the true facts and must reasonably rely on the other party’s conduct to his detriment.” (Alfaro v. Community Housing Improvement System & Planning Ass'n., Inc. (2009) 171 Cal.App.4th 1356, 1381.)
  4. Statute of Limitations. 
    1. CC&R violation: 5 years from the time the board discovers the violation or, through the exercise of reasonable diligence, should have discovered the violation. (Code Civ. Proc. § 336(b); Pacific Hills HOA v. Prun.) 
    2. Breach of contract, the SOL is 4 years (Code Civ. Proc. § 337);
    3. Breach of fiduciary duty it is 3 years from the discovery of the wrongful act (Smith v. Superior Court);
    4. To challenge election results is 1 year.
    5. Construction defects varies depending on the particular defect.
    6.  Property damage is 3 years. (Code Civ.Proc. § 338.)

Breach of Contract. CC&Rs are equitable servitudes and not a contract. An "equitable servitude" creates an obligation or encumbrance on land, enforceable in equity. Because many attorneys and judges fail to understand the difference between breach of contract and breach of CC&Rs, there has been a blurring of the difference. An argument can be made that the cause of action labels are not important. It is the substantive allegations that matter. "It is not what a paper is named, but what it is that fixes its character." (Parnham v. Parnham (1939) 32 Cal. App.2d 93, 96 [89 P.2d 189]; see also Williams v. Beechnut Nutrition Corp.(1986) 185 Cal.App.3d 135, at fn.3, quoting Parnham.)  The court in Williams reasoned, in addressing a demurrer, that it does not matter what one labels a cause of action, and in that case the plaintiff did not even label them. It's the substantive allegations that matter. Courts have characterized CC&Rs as a contract for limited purposes in the following cases:

[C]ourts have described recorded declarations as contracts. (E.g., Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 512-513 [CC&R's as contract between condominium owners association and unit owner]; Villa Milano, supra, 84 Cal.App.4th at pp. 824-826 [CC&Rs as contract between developer and homeowners association]; see Barrett v. Dawson (1998) 61 Cal.App.4th 1048, 1054 [right of neighbors to enforce a recorded restrictive covenant limiting the neighboring property's use was "clearly contractual"]; Harbor View Hills Community Assn. v. Torley (1992) 5 Cal.App.4th 343, 346-349 [amendment to Civ. Code § 1717, which governs contractual attorney fees, was applicable to CC&Rs of homeowners association]; see also Franklin v. Marie Antoinette Condominium Owners Assn. (1993) 19 Cal.App.4th 824, 828, 833 [accepting parties' assumption that CC&Rs formed a contract between condominium owners and owners association].) (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (2012) 55 Cal.4th 223, 240.)

Attorney's Fees. Earlier cases construing the CC&Rs as a contract sought attorney's fees under Civil Code § 1717 (see Deane Gardenhome Assn. v. Denktas). Some attorneys seek fees under both Civil Code § 1717 and Civil Code § 5975. (Martin v. Bridgeport Community Assn. [fees sought under both but apparently awarded only under predecessor to Civ. Code § 5975].) The court in Farber v. Bay View Terrace offered some guidance. "The court [in Salawy v. Ocean Towers] held fees were not recoverable because the action was based on a breach of promise, not the governing documents. (Salawy, at p. 671.) Here, the essence of Farber's claim is that the CC&Rs place the obligation to fix Stiffler's roof on the Association, so she cannot be liable for the cost. There is no promise here, only an obligation she finds in the CC&Rs. That is an action to enforce the CC&R's, whether framed in terms of Farber's rights against the Association or Stiffler's.” (Farber v. Bay View Terrace)

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