Condo Court

On November 10, 2011, the Court of Appeal upheld the validity of a tenant’s agreement to waive liability for the landlord’s negligent operation of a common area health club/exercise facility. (Lewis Operating Corp. v. Superior Court).

A tenant suffered personal injuries while using a treadmill at a tenant-only common area exercise facility/health club amenity within the apartment complex. The tenant filed a lawsuit, which the landlord argued was without merit because the tenant had signed an agreement to waive all negligence claims arising from the tenant’s use of the health club facilities.

The court agreed with the landlord and upheld the validity of the tenant’s signed waiver:

We conclude that where a landlord chooses to enhance its offering by providing an on-site health club or exercise facility that goeswell beyond bare habitability, there is no reason why the landlord may not protect itself by requiring the tenant, as a condition of use of the amenity, to execute the same waiver or release of liability that could lawfully be required by the operator of a separate, stand-alone health club or exercise facility

The Bottom Line: Although this case arose within the landlord/tenant context, courts often utilize similar standards when deciding analogous cases involving homeowner associations.  HOAs which include common area health clubs, gyms or other amenities should consider requiring all owners and residents to sign properly drafted liability waivers.

Gary Kessler

What happens when a homeowner files a lawsuit containing ten claims against an Association (causing the the HOA to incur over $250,000 in attorneys fees), and three days before trial suddenly dismisses eight of those claims?

On November 14, 2011, the Court of Appeal decided that such an Association is entitled to recover at least some of its attorneys fees, and warned homeowners to get their “ducks in a row” before filing lawsuits against their HOAs. (Salehi v Surfside III Condominium Owners’ Assn).

Ms. Salehi, (who was an Association member as well as an attorney) filed two similar lawsuits against the Surfside III Condominium Association — the first as the attorney for another homeowner, and the second on her own behalf. Both lawsuits contained similar allegations:  the Association failed to appropriately maintain and repair the common areas, failed to maintain an adequate reserve fund, and failed to disclose certain physical and financial problems.

Three days before Ms. Salehi’s personal trial was set to begin (and on the same day that she lost the first case) she suddenly dismissed eight of her ten claims against the Association. The Association sought recovery of over $250,000 in attorneys fees which it incurred to defend against these eight individual claims.

The trial court denied the Association’s request for attorneys fees, but the court of appeal reversed. The appellate court found that the Association was entitled to recover at least some of its attorneys fees from Ms. Salehi, reasoning as follows:

A party contemplating litigation to enforce the covenants, conditions, and restrictions (CC & Rs) of a condominium project should get the “ducks in a row.” That is to say, such party should be ready to go forward procedurally and prove its case substantively. Failure to do so subjects the losing party to an award of attorney fees….  Based on faulty reasoning, Salehi dismissed eight of the ten causes of action on the eve of trial. She prevailed on no level whatsoever, let alone on a “practical level….”

The Bottom Line: If a homeowner loses a lawsuit which he/she files against their Association, the homeowner risks being ordered to reimburse the HOA for its attorneys fees.

Gary Kessler

April 22, 2010 is the effective date of  new Environmental Protection Agency lead paint requirements for most dwelling units and common areas within homeowners associations which were built before 1978.

There are some exemptions to the law’s requirements, including the following:

• Housing built in 1978 or later.

• Housing for elderly or disabled persons, unless children under six reside or are expected to reside there.

• Zero bedroom dwellings (studio apartments, dormitories, etc.).

• Housing or components declared to be lead-free by a certified inspector or risk assessor.

• Minor repair and maintenance activities that disturb 6 square feet or less of paint per room inside, or 20 square feet or less on the exterior of a home or building. However, minor repair and maintenance activities do not include window replacement and projects involving demolition or prohibited practices.

And where the firm doing the work obtains a signed statement from the owner that all of the following are met, then the training, certification and work practice requirements of the rule do not apply:

• The renovation will occur in the owner’s residence

• No child under age 6 resides there;

• No woman who is pregnant resides there;

• The housing is not a child-occupied facility; and

• The owner acknowledges that the renovation firm will not be required to use the work practices contained in the EPA rule.

It is important to note that there are severe penalties for violations of this law, including fines of up to $32,000 per violation, per day.

In the newly published decision of Clear Lake Riviera Community Association v. Cramer (February 26, 2010) , a homeowner who knowingly built a home in violation of the Association’s height restrictions was ordered to fully comply with the HOA guidelines, even though reducing the height of the house “will be expensive and inconvenient, and its cost may exceed the amount of economic harm inflicted…on the neighboring properties, at least as measured by the diminution in market value of those properties.”

The court ruled that the house had to be reconstructed to comply with the Association’s height restrictions, reasoning that:

1) The height restriction violation was not “innocent” because the offending homeowner was aware of the restriction, his neighbors had raised the height issue before the foundation was poured, and he made no good faith effort to comply with the restriction.

2) The height violation caused irreparable harm to neighbors because the new construction blocked their unobstructed views of the lake. Additionally, the neighbors suffered a loss of privacy, since the new house looked onto these residences.

3) The $200,000 cost of correcting the violation was not “grossly disproportionate” to the hardship caused to the Association because the height violation caused the value of one neighbor’s home to be diminished by over $75,000.

Ms. Warner, who lived in an Orange County apartment complex, suffered from multiple spine, muscular and nervous system ailments. Ms. Warner’s doctor believed that a dog’s companionship would lessen the anxiety and depression caused by her painful conditions.  Consequently,  Ms. Warner obtained Nellie,  a mixed  Labrador Retriever/German Shepherd.

When Ms. Warner tried to renew her lease, the apartment complex owner denied her request because Nellie exceeded a newly-imposed weight limit for pets.  Ms. Warner replied that Nellie was a companion dog, not a pet, and the owner demanded that Ms. Warner provide proof.

Ms. Warner produced a doctor’s certification confirming that Nellie’s  companionship was medically necessary, but the apartment owner nevertheless proceeded to terminate her tenancy based upon violation of the pet weight limit. Since Ms. Warner could no longer care for Nellie, she felt she had no choice but to euthanize her dog.

California’s Department of Fair Employment and Housing (DFEH)  filed a lawsuit against the apartment complex owner for disability discrimination. In November 2009, the apartment owner settled the lawsuit by paying Ms. Warner $298,333.  The DFEH explained the basis for this settlement by stating: “Companion animals are not pets. The Fair Employment and Housing Act requires housing providers to modify pet policies so that individuals with disabilities who need companion animals can have them.”

In August 2007, the Association board members were elected to one year terms. In April 2008, the entire board was recalled, and in June 2008 an election was held to choose the board members who would serve out the remaining two months of the recalled board members’ terms – i.e., until August 2008.

However, the Association refused to hold the regularly scheduled board election in August, arguing that the board members elected in April 2008 should continue serving until July 2009.

In the December 17, 2009 unpublished opinion of  Samii v La Villa Grande Homeowners Assn,  the Court of Appeal held that if an association refuses to hold an election as required by the governing documents, any Association member can simply file a petition in Superior Court seeking a quick (summary) order that the election be held. This simple procedure is authorized by Corporations Code section 7510(c), which states that such a summary court order is warranted if the Association “fails to hold a written ballot for a period of 60 days after the date designated therefore.”

In the December 22, 2009 case of Turner v. Vista Pointe Ridge HOA, the California Court of Appeal held that an Association’s communications in connection with a member’s architectural application and its efforts to enforce the CC&Rs are not always protected speech.

In Turner, the Association granted approval for the Turners to make changes to their property and construct a new casita, provided that the casita did not exceed a certain height. During construction, the Turners decided to increase the height of the casita by about a foot or a foot and a half without first obtaining a variance from the Association.

When a neighbor threatened to sue the Association because the casita obstructed his view, the Association unsuccessfully attempted to convince the Turner’s to comply with the original approval and the architectural standards. Eventually, the Association levied a $23,732.40 reimbursement assessment against the Turners.

The Turners filed a lawsuit against the Association. The Association responded by filing a SLAPP motion to dismiss the complaint, arguing that all of its activities to enforce the CC&Rs and architectural standards were constitutionally protected free speech.

The appellate court rejected the Association’s arguments and allowed the Turners to proceed with their case. The court explained:

In this case, there is no indication that the acts in question were undertaken in furtherance of the right of petition or free speech. The causes of action, as described in the complaint, arose out of the Association’s purported unwillingness to grant a variance, demand that money be paid in exchange for a variance, demand that various disputed improvements be removed, levy of a reimbursement assessment, failure to comply with the CC & R’s, and demand that the Turners pay to remove a tree located in the common area.

It is true that certain Association demands were made in writing. But the mere fact that the demands were put in writing did not convert the Association’s acts in connection with CC & R’s enforcement into acts in furtherance of the right of free speech.

A CC&R provision required that all homeowners comply with certain County zoning ordinances.  An owner (who was also the chairperson of the Association’s architectural committee) placed structures on his property which violated those County ordinances. After the Architectural Committee failed to enforce that CC&R provision against its chairperson, the adjacent homeowners filed a lawsuit.

Can the architectural committee chairperson be sued for breach of fiduciary duty?

Yes.  In the unpublished December 17, 2009 decision of Wagner v Bike, the California Court of Appeal held that the adjacent homeowners could proceed on their cause of action against the architectural committee’s chairperson for breach of fiduciary duty “for failing to enforce or selectively enforcing the CC&R’s or other governing documents in his capacity as a member or chairman of the Architectural Committee.”

 Facts of the Case. The Petersons purchased a home in the Bridgeport Community Association. They allowed the Martins (their daughter and son-in-law) to live in the house, in exchange for the Martins’ agreement to pay all costs involved with the property. The Petersons also executed a power of attorney/assignment which authorized the Martins to handle all property-related matters. After a dispute arose concerning the property line between the Peterson lot and the adjacent common area, the Martins filed a lawsuit against the Association for breach of the CC&Rs and violation of the Davis-Stirling Act.

Positions of the Parties. The Association argued that the claims should be dismissed since the Martins, as tenants/occupants of the house, were neither owners of the property nor members of the Association. The Martins contended that they could legally enforce these claims as occupants of the property, pointing to the CC&R provisions requiring that all tenants/occupants be given copies of and abide by the governing documents.

Decision of the Court. In the unpublished case of Martin v. Bridgeport Homeowners Association (decided April 7, 2009), the California Court of Appeal ruled in favor of the Association.

Reasoning of the Court. As property occupants, the Martins were obligated to comply with the Association’s governing documents. However, a person who merely resides on a lot as an occupant “is different from being an owner of a separate interest who, by virtue of his ownership, is also [an association] member.” Accordingly, the Petersons’ right to enforce the governing documents and the Davis-Stirling Act was “inextricable” from their ownership of the lot, and they could not assign these enforcement rights to non-owners without also transferring ownership of the property.

Comment. The nature and scope of a tenant’s rights within a community association depends upon an analysis of the particular matter at issue. For example, tenants do not have the right to vote in association elections either in person or by proxy, nor do they have the right to attend and speak at board meetings (only members have these rights). On the other hand, tenants do have such rights as to use the common areas, to have continuous access to the units they occupy, and to enforce federal and state fair housing laws against associations.

Facts of the Case. Steven Nelson lived in a home within the Avondale Homeowners Association. Nelson was a “world renowned Homeopathic Nutritionist and religious counselor” with a doctorate in pharmacology and a doctorate of clinical religious counseling.

In 2006, Nelson suffered an illness which prevented him from leaving home or driving. As a result, he relocated his religious and medical counseling practice to his residence, where he would see up to eight patients per day for one-half hour sessions, five days per week.

The Association had a rule which prohibited home businesses. Fifteen of Nelson’s neighbors presented the Association with a petition, complaining that Nelson was selling products from his home, and asking that the sales be stopped. The Association sent him a violation notice and a notice of hearing. Nelson responded by requesting that, due to his illness, he be allowed to maintain his business at his residence for six to twelve months until he recovered.

After the hearing (which Nelson did not attend), the board issued the following decision: 1) A $200 enforcement assessment was imposed; 2) All Nelson’s guest passes (except for household vendors) were revoked until he provided the Association with a permanent guest list of family and friends; and 3) The board agreed to reasonably accommodate Nelson’s illness by permitting increased product pickups and deliveries at his home until he could reopen his regular office, provided that Nelson paid the enforcement assessment in full and provided the association with a permanent guest list.

Nelson filed a lawsuit against the association for disability discrimination, religious discrimination, breach of contract and intentional infliction of emotional distress. He also claimed that since he was not conducting a home business in violation of the Association’s rules, the Association acted arbitrarily when it fined him and restricted his visitors to those on a permanent guest list. He sought an injunction which would stop the board from preventing his visitors, guests, religious affiliates and patients from entering the Association gates.

The Decision of the Court. In Nelson v. Avondale HOA (ordered published on March 26, 2009) the court of appeal ruled in favor of the Association.

The Reasoning of the Court. The court noted that Nelson admitted he was running a business out of his home in a letter to the Association: “The continuity of my business and my livelihood are at stake. Thus, I respectfully request that I be allowed to continue to work from my home.”

Furthermore, the justices specifically found that Nelson’s business violated the Association rule which stated: “Pedestrian and vehicular traffic will be limited to that normally associated with residential districts”, since up to eight visitors per day came to his home, five days a week.

And finally, Nelson violated a second Association rule (“The conduct of a home occupation requires both the approval of the City of Palm Desert and the approval of the Association”), in that he did not seek permission from either the City or the Association for his home business until after he received the Association’s notice of violation. Thus, the court concluded that Nelson was operating a home business in violation of the Association’s rules.

Comment. Home businesses which have a detrimental effect on neighbors and on the residential nature of a development are a serious problem in many associations. On the other hand, a home business which does not exhibit any external manifestations or signs may be acceptable to the association and its members.

Thus, if an association wants to limit home businesses, it should make sure that its governing documents contain appropriate restrictions, and that the board consistently and correctly enforces them. It is important to note that some home businesses may be protected by law (regardless of their impact on neighbors), such as certain residential care facilities, day care homes for children, and alcohol/drug treatment facilities. Additionally, since stopping a home business can cause a member to suffer economic losses, and since other related issues can be involved (such as alleged discrimination), boards should consult with counsel before taking any enforcement actions.