Duty to Enforce. A homeowners association, through its board of directors, has 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.)
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.)
“It is a settled rule of law that homeowners' associations must exercise their authority to approve or disapprove an individual homeowner's construction or improvement plans in conformity with the declaration of covenants and restrictions” and that they must do so in good faith, consistent with their fiduciary obligations to the homeowners. (Cohen v. Kite Hill Community Assn. (1983) 142 Cal.App.3d 642, 650-51; see also Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 383.)
Duty to Investigate. Since associations have a duty to enforce restrictions (Ekstrom v. Marquesa), it follows that they have a duty to investigate complaints by residents of rules violations.
Enforcement Options. Associations can enforce restrictions through monetary penalties, suspension of privileges and legal action for injunctive relief. 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.
Standing. Associations and members both have standing to litigate enforcement of CC&Rs. Tenants and non-members do not. See "Legal Standing."
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.)
Statute of Limitations and Waivers. The statute of limitations for a breach of contract is four (4) years (Code Civ. Proc. § 337) and the remedy is generally limited to money damages. The statute of limitations for breach of a CC&Rs is five (5) years (Code Civ. Proc. § 336(b); Pacific Hills HOA v. Prun) and the remedy is injunctive relief. In addition, enforcement of CC&Rs is subject to equitable defenses such as laches, waiver and unclean hands.. If appropriate, boards can voluntarily grant waivers. Failure by an association to act timely to enforce restrictions can result in an involuntary waiver of the right to enforce.
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)
Enforceability. CC&Rs have a presumption of validity and are enforceable unless found unreasonable.
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