Board's Duty to Investigate Complaints & Enforce Rules
The primary purpose of an association is to enforce its governing documents on behalf of and for the good of all property owners. (Promenade at Playa Vista v. Western Pacific Housing, (2011) 200 Cal.App.4th 849, 867) “Indeed, the defendants fulfilled their duty to the plaintiff as a shareholder by strictly enforcing the provision in the CC&Rs that prohibited alteration of the common areas except with the prior written consent of the board.” (Frances T. v. Village Green Owners Ass'n (1986) 42 Cal.3d 490, 513-514. If a board fails to enforce them, members can go to court to compel enforcement. (Ekstrom v. Marquesa)
Investigating Complaints. Associations must investigate complaints by residents of rule violations. If a violation exists, associations must enforce their governing documents. (Nahrstedt v. Lakeside Village Condominium Ass'n (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 Ass'n (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)
Procedural Requirements For Enforcement
In addition to showing a violation of a restriction, an association must show that it followed its standards and procedures before pursuing such a remedy, that those procedures were fair and reasonable, that its substantive decision was made in good faith, and that it is reasonable, not arbitrary or capricious. (Ironwood v. Solomon) A homeowners association suing a homeowner to enforce its CC&Rs bears the burden of demonstrating that "it followed its own standards and procedures" and that "its procedures were fair and reasonable, its substantive decision was made in good faith and was reasonable, and its action was not arbitrary or capricious." (Friars Village Homeowners Assn. v. Hansing (2013) 220 Cal.App.4th 405, 413)
To enforce its rules, an association must have a rules enforcement policy in place. When an association has notice of a rules violation, whether through a board member, committee member, employee, managing agent, or resident, the following steps show the process normally followed:
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 distinction between breach of contract and breach of CC&Rs, the distinction has become blurred. 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; see also Williams v. Beechnut Nutrition Corp.(1986) 185 Cal.App.3d 135, at fn. 3, quoting Parnham) In addressing a demurrer, the court in Williams reasoned that it does not matter what one labels a cause of action; in that case, the plaintiff did not even label the cause of action. It's the substantive allegations that matter. Courts have characterized CC&Rs as a contract for limited purposes.
[C]ourts have described recorded declarations as contracts. (E.g., Frances T. v. Village Green Owners Ass'n (1986) 42 Cal.3d 490, 512-513 [CC&Rs as contract between condominium owners association and unit owner]; Villa Milano, supra, 84 Cal.App.4th at pp. 824-826 [CC&Rs as a contract between the developer and community 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, applied to CC&Rs of community associations; see also Franklin v. Marie Antoinette Condominium Owners Ass'n (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 Ass'n v. Denktas). Some attorneys seek fees under Civil Code § 1717 and Civil Code § 5975. (Martin v. Bridgeport Community Ass'n [Fees were sought under both, but awarded only under the 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; it is only an obligation she finds in the CC&Rs. That is an action to enforce the CC&Rs, whether framed in terms of Farber's rights against the Association or Stiffler's.” (Farber v. Bay View Terrace)
Boards Have Discretion to Litigate
Standing. Associations and their members have standing to enforce CC&Rs, while tenants and non-members do not. See "Legal Standing."
Discretion to Litigate. Although a community association has discretion to enforce its documents, this discretion must be exercised in a manner consistent with its fiduciary duties and the plain language of the CC&Rs. (Ekstrom v. Marquesa at Monarch Beach Homeowners Ass'n (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 Ass'n (1999) 21 Cal.4th 249, 268) Associations can enforce restrictions through monetary penalties, suspension of privileges, and legal action for injunctive relief. 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 whether to litigate a particular violation. (Beehan v. Lido Isle) Litigation is so burdensome and expensive that it is no longer a viable option for most homeowner association disputes. Litigation costs are both direct and indirect.
- Direct Cost: Attorneys' fees, expert fees, and court costs.
- Productivity Cost: The value of lost time and opportunities.
- Continuity Cost: The loss of ongoing relationships.
- Emotional Cost: Emotional distress from conflict and loss of sleep.
In Moran v. Oso Valley Greenbelt Ass'n, an owner was awarded attorneys' fees when the association failed to produce records after repeated requests. In addition to incurring tens of thousands of dollars in its own attorneys' fees, the association was ordered to pay the homeowner $54,485.24. The reverse is also true, where the homeowner is ordered to pay the association significant amounts of money.
Discretion Defined. The exercise of discretion and independent judgment "involves the comparison and the evaluation of possible courses of conduct and acting or making a decision after the various possibilities have been considered. The term ... implies that the person has the authority or power to make an independent choice, free from immediate direction or supervision and with respect to matters of significance." (Richardson v. Ruan Transp. Corp., Cal. App. Unpub. (Sep. 8, 2020))
- The power or right to act according to the dictates of one's own judgment and conscience, uncontrolled by the judgment or conscience of others. -Black's Law Dictionary
- The freedom and authority to decide what to do. -Collins English Dictionary
- The right to choose what should be done in a particular situation. -The Britannica Dictionary
- The right to make a choice, based on judgment. -Cambridge Dictionary
Judicial Deference. Although decisions of the board are accorded deference under the business judgment rule, such deference is granted only if the association acts in good faith and on reasonable investigation in the best interests of the association and its members. Judicial deference precludes second-guessing a board's decisions when choosing among options to address a violation. (Haley v. Casa Del Rey Homeowners Ass'n (2007) 153 Cal.App.4th 863, 875) As Haley makes clear, judicial deference applies when an association responds to a member-to-member complaint about CC&R violations by choosing from many options to resolve the matter. (Id. at 875-876)
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 that the directors approved.)
How to Disclose Disciplinary Actions
Members do not have a "right" to know the results of a disciplinary hearing against a neighbor. Unlike the public court system, where almost every detail of every criminal and civil action can be published, HOA disciplinary actions are held in executive session, and minutes or other documents related to the disciplinary action are not subject to review by the membership. (Civ. Code § 4950, Civ. Code § 5215(a)(5)(B))
Reported Generally. Even so, it is allowable to report generic information in the open meeting minutes and in the association's newsletter. For example, "During the month of April, disciplinary hearings were held on the following violations: (i) dog not on a leash that resulted in a warning, (ii) nuisance noise from a late-night party that resulted in a fine of $75, and (iii) a parking violation that resulted in a fine of $50." This kind of reporting keeps the membership informed without identifying the persons involved.
Possible Exception to Privacy. If the person being disciplined represents a foreseeable threat to the community, the board may have a duty to warn the membership. For example, a member who likes to set small fires in the common areas or has been vandalizing properties. That duty may be satisfied by publishing the board's findings in the newsletter. Boards should consult with their legal counsel on such issues.
Failure To Enforce Governing Documents Has Consequences
An association's failure to enforce its restrictions can result in legal action by members against the association for failing to enforce the rules, or in an involuntary waiver of the association's right to enforce its restrictions.
Laches is based on the theory that equity aids the vigilant, not those who procrastinate when exercising their rights. If a person is slow to assert a right or claim, and 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 the plaintiff complains or prejudice to the defendant resulting from the delay." (Pacific Hills HOA v. Prun)
Waiver is the knowing, intentional relinquishing or abandoning 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 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 insufficient to deem a restriction unenforceable. (Kapner v. Meadowlark Ranch Ass 'n (2004) 11 6 Cal.App.4th 1182, 1190)
Estoppel may be found where the party to be estopped has, by false language or conduct, led another to do what they would not otherwise have done and, as a result, they have suffered injury. (Steinhart v. County of Los Angeles (2010) 47 Cal.4th 1298, 1315.) Thus, “the party asserting [estoppel] must be ignorant of the facts and 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)
Statute of Limitations.
CC&Rs Are Presumed Reasonable
CC&Rs. An association's CC&Rs shall be enforceable as equitable servitudes unless they are unreasonable. (Civ. Code § 5975) Use restrictions in a recorded declaration are afforded a "presumption of validity" and enforced unless found unreasonable under a deferential standard. (Nahrstedt v. Lakeside Village Condominium Ass'n (1994) 8 Cal.4th 372, 383.) Whether CC&Rs are reasonable is determined not by reference to facts 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:
- Is arbitrary,
- Imposes burdens on the property that substantially outweigh the restriction's benefits to the development's residents or
- 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 constructive notice of the restrictions, whether or not they received them in escrow or read them.
Rules. Rules and regulations adopted by a board are not given the same presumption of reasonableness as CC&Rs. (Dolan-King v. Rancho Santa Fe) Whether a rule is reasonable is to be determined not by reference to facts 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 applies to rules: they should be enforced unless they are wholly arbitrary, violate a fundamental public policy, or impose on the use of affected land a burden that far outweighs any benefit. (Sui v. Price) To be enforceable, operating rules must meet the following criteria (Civ. Code § 4350):
- The rule is in writing.
- The rule is within the board's authority conferred by law or the association's governing documents.
- The rule does not conflict with governing law, the association's declaration, articles of incorporation, or bylaws. (Ekstrom v. Marquesa)
- The rule is adopted, amended, or repealed in good faith and in substantial compliance with the requirements of this article.
- The rule is reasonable.
Because rules are not recorded, they must be distributed to owners to be effective.
Rules Are Not Presumed Reasonable
Rules and regulations 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 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 applies to rules: they should be enforced unless they are wholly arbitrary, violate a fundamental public policy, or impose on the use of affected land a burden that far outweighs any benefit. (Sui v. Price) To be enforceable, operating rules must meet the following criteria (Civ. Code § 4350):
- The rule is in writing.
- The rule is within the board's authority conferred by law, by the association's declaration, articles of incorporation or association, or bylaws.
- The rule does not conflict with the governing law, the declaration, the articles of incorporation, or the bylaws. (Ekstrom v. Marquesa)
- The rule is adopted, amended, or repealed in good faith and in substantial compliance with the requirements of this article.
- The rule is reasonable.