Condo Court

FACTS. An Association’s architectural review committee (ARC) denied Mr. and Ms. Fox’s application to expand their deck because it would impair their neighbor’s ocean view. The Foxes sued the association, arguing that their application should have been approved since the neighbor did not have any right to keep her existing view.

DECISION OF THE COURT. In the July 16, 2008 unpublished opinion of Fox v. Corniche Sur Mer Homeowners Assn., the California Court of Appeals ruled in favor of the Association.

REASONING OF THE COURT. The court reasoned that:

“[I]t was well within the discretion of the ARC to consider the impact of the improvement on existing ocean views. California law specifically authorizes common interest developments to grant an architectural review committee broad, subjective discretion to reject proposed improvements on aesthetic, artistic, or similar grounds.”

Additionally, the court found that the Association’s failure to list all of its reasons for denying the application in its notification letter to the applicant did not violate Civil Code section 1378(a)(4). This statute requires, among other things, that the association issue a written decision on each architectural application, which must include an explanation of why a proposed change is disapproved. As the court explained:

“[T]here is nothing in either the statute or… the CC&Rs requiring a statement of every factor or reason for denying the project. And while it would be problematic if the board gave constantly shifting reasons, there is no evidence that is the case here. Stating some but not all of the reasons for denial does not render the denial ineffective. As we have discussed, denial of the application because of the new deck’s impact on existing ocean views was within the ARC’s discretion. That it had other reasons cannot be used to negate its decision.”

RECOMMENDATIONS. Make sure that your governing documents expressly set forth whether (and to what extent) existing views are to be protected. Similarly, your Association’s governing documents should be checked to make sure that they clearly give the architectural committee the appropriate amount of discretion to consider (or to exclude from consideration) aesthetic and artistic grounds in connection with decisions on architectural applications. Finally, all decisions on proposed architectural changes must be documented in a writing which describes why the proposed change is disapproved and otherwise fully complies with Civil Code section 1378.

Facts of the Case. An association retained an outside vendor to provide security services. The security company assigned one of its guards to work at the association. The security company subsequently fired the guard – who then proceeded to sue the association, its president and an association employee for discrimination, harassment, retaliation and wrongful discharge. Did the guard prevail on these claims?

Ruling of the Court. The court ruled against the guard in the unpublished 2007 California Court of Appeals case of Thompson v. Oceanaire Homeowners Association, 2007 WL 1898511.

The guard, Wayman Thompson, was hired and fired by his actual employer, the security company. Therefore, in order to prevail on his claims against the association, Thompson was required to establish that the association was his “special employer.” The court held that Thompson did not meet this burden because the association did not exercise sufficient control over him or his job duties, did not train him or provide him with any job-related equipment, and the association’s property manager did not have the power to terminate his employment.

Acknowledging the right of community associations to oversee third party vendors who perform work on association property, the court concluded that an association:

“must be permitted to monitor the performance of the employees of service providers with which [it] contracts, and…must be able to do so without thereby becoming the special employer of those employees.”

Analysis. An association may, in some situations, be treated as the special employer of a vendor’s employee. This determination is a factual one, based in a large part upon who has the right of control over the employee’s activities. The more control an association retains over a vendor’s employees, the more likely a court will find the association to be a special employer – with all of the additional liability exposure which results from that designation. This is another good reason for boards and managers to periodically check with their insurance agents to make sure that the association is appropriately insured.

What are an association’s responsibilities to residents after a crime is committed in the common area? Can the association and its manager be held liable to a resident who is the victim of a subsequent common area assault? Could a manager who did not know about prior criminal acts nevertheless be held liable for telling a prospective resident that the complex is safe and there is no crime in the area?

Facts of the Case: Yu Tan was shot in the neck (rendering him a quadriplegic) during an attempted carjacking which occurred within the ungated portion of his apartment complex’s common area parking lot. During the two years immediately prior to the attack on Mr. Tan, there had been three similar violent attacks in the ungated parts of the common area.

Moreover, when deciding whether to move into the complex, Mr. Tan relied upon the apartment complex’s leasing agent’s statement to him that the property was safe and there was no crime in the area. At the time the agent made these statements, he had not made any effort to educate himself about criminal activity in the area.

Mr. Tan sued the property management company and the owners of the apartment complex, claiming that they were liable for his injuries.

Ruling of the Court: In Tan v. Arnel Management Co., 2008 DJDAR 6242 (April 2008), the California Court of Appeals ruled in favor of Mr. Tan.

The three prior similar assaults put the property complex owners and management company on notice that there was a risk of violent criminal assaults on the common area. Consequently, the court found that the complex owners and management company had a legal duty to provide “relatively minimal” additional security measures — such as installing a gate at the entrance into the common area parking lot and closing a small gap in the fencing around the entire complex – neither of which would have required the expenditure of significant funds. The court concluded that their failure to do so exposed both the management company and the complex owner to liability for the attack.

The court also held that the statements to Mr. Tan that the property “was safe” and there was “no crime in the area” were misrepresentations. Although the agent of the complex did not have any actual knowledge about the prior criminal activities, he should have known about the three prior assaults and other property related crimes which had recently been committed at the complex. Therefore, both the management company and the complex owner were found to be liable for these misrepresentations by their representative.

Recommendations: Liability for criminal acts on common areas is a very important concern for associations and their managers. Since both community associations and apartment complexes have common areas which are controlled by the association or landlord, courts frequently rely on apartment cases when deciding issues involving the association’s common area duties. Therefore, the Tan case should be carefully reviewed by all associations and their managers. If there have been criminal acts within an association, appropriate investigation and remedial action should be taken after consultation and advice from the association’s legal counsel.

Facts of the Case. For fifteen years, several fourth floor unit owners at The Landing HOA had been using (without HOA approval) the common area attic spaces next to each of their units for storage. Each of these attic spaces was only accessible to the adjacent unit. After one owner complained, the board of directors conducted an investigation.

The board eventually decided that, based upon their interpretation of the CC&Rs and the results of their investigation, it would grant each owner a license to use 120 square feet of their adjacent common area attic space for storage, provided that the owner signed a permission form and obtained insurance.

Additionally, the directors amended the Association rules to specifically allow the fourth floor owners to use their adjacent attic spaces, conducted an election wherein the membership overwhelmingly approved the rule change, and passed a resolution transferring to fourth floor owners the exclusive right to use the common area attic spaces.

The complaining owner believed that the board had improperly given away part of the Association’s common area to individual owners, and sued the association.

Question for the Court. The court was asked to decide whether the board properly allowed the fourth floor homeowners to exclusively use the common area attic spaces next to their units.

Decision of the Court. In the case of Harvey v. The Landing Homeowners Association, 2008 WL 903096 (2008), the court ruled in favor of the Association.

The court found that the Association’s CC&Rs did not require that the board act in a specific way. Instead, the governing documents gave the board the discretion to decide whether the fourth floor owners could use the adjacent common areas for storage. Therefore, the court’s responsibility was to defer to the Board’s “authority and presumed expertise regarding its sole and exclusive right to maintain, control and manage the common areas.”

In this case, the board properly made a discretionary “economic decision” to allow the fourth floor owners to use the common area attic spaces, after conducting a “reasonable investigation” and making its decision “in good faith, and with regard for the best interests of the community association and its members”.

Recommendations. When confronted with an issue involving the interpretation of a particular governing document provision, it is very important to distinguish between mandatory and discretionary provisions. Some provisions are mandatory: These must be strictly followed by the board (unless unenforceable for some other reason, such as violation of law or public policy). However, other sections give the board wide discretion as to how it can act and what decisions it can make. If the applicable provision is discretionary, then before making a decision, the board should conduct a reasonable investigation, act in good faith, and base their decision upon what is the best interest of the association as a whole.

Facts of the Case. An association’s architectural committee approved, with certain conditions, an owners’ plans to remodel and expand their home. The owners subsequently decided to move the location of the garage, and submitted modified plans to the committee.

The committee denied approval of the modified plans. The owners agreed to correct the committee’s objections to the new garage, while noting that they would begin construction only on those areas unrelated to the garage based upon the originally approved plans.

After construction began, the association ordered the owners to immediately stop all work. The association claimed that its original approval was not final since all of the stated conditions had never been met. Therefore, according to the association, the owners had no right to begin construction.

Questions for the Court to Decide. Was the architectural committee’s “conditional approval” of the owners’ original plans final and binding? Did the association have the right to stop the owners from beginning their construction?

Ruling of the  Court. In the unpublished California Court of Appeal case of Brutocao v The Hunt Club Community Association (decided February 29, 2008), the court ruled that the committee’s conditional approval of the original plans was final and binding, and therefore the association had improperly stopped the owners from beginning construction.

The court explained that even though the committee’s original approval contained conditions, it was nevertheless final and binding because the committee did not specifically state that any of the listed conditions had to be performed before the owners could begin construction. Thus, the owners could comply with the conditions after they began construction, and the association’s order to stop work was improper.

Furthermore, the court noted that the association’s governing documents did not provide for the automatic invalidation of approved plans which were subsequently modified by an owner.

Large Damages Awarded. The trial court ordered the association to pay the owners’ increased construction costs in the amount of $163,078, plus reimbursement of the owners’ attorney’s fees of $176,976.75 and court costs of $17,976.75.

Recommendations. If the association wants an owner to satisfy certain conditions before construction can begin on a proposed remodel, the association should specifically and unequivocally so advise the owner in writing. In such a situation (and depending, of course, on the governing document provisions), instead of “conditionally approving” the application, it is generally better for the association to formally deny the application, list the reasons for the denial, and advise the owner to submit a new application with revised plans.