The Condo Building. A high rise apartment building (the Churchill) was constructed in 1962 and was converted to condominiums in 1976. The original construction contained an unknown defect: holes in the concrete slabs between each floor had not been fire proofed, as required by the original architectural plans and the city building permit. Since this defect was not known at the time of 
construction, a Certificate of Occupancy for the building was issued. Furthermore, no order to change or upgrade these slab penetrations has ever been issued as existing building codes allow such unfilled floor penetrations to remain as existing, non-conforming conditions until a unit is remodeled, at which time the remodeling unit owner must fill any exposed floor penetrations.
The Smoke Odors. The Ritters purchased one unit within the building in 1995. In 1998, they began complaining to the Association about cigarette smoke odors within their unit. In 1999, the Ritters purchased (and then remodeled) the adjoining unit, and soon discovered that this second unit had the same odor problem.
In 2003, both the Ritters and the Association hired separate experts to determine the cause of these odors, and both experts came to the same conclusion: The cigarette smell was caused by smoke coming from the units below through unfilled slab penetrations which were present throughout the entire building, and these penetrations posed a significant fire safety risk.
The Board Hearing. The board held a hearing, during which the Ritters were represented by counsel. After considering the evidence presented, the Association’s expert report, and the advice of counsel, the board found that: 1) the Ritters’ 1999 remodel triggered their obligation to fill the floor penetrations adjacent to their units (at a cost of approximately $2,700 per unit); 2) the Association did not have a legal obligation to file the holes because they were “existing, non-conforming” conditions; 3) The Association would not at this time undertake the expense of making the corrections; and 4) The Ritters were ordered to pay $200 per day in fines to the Association if they failed to comply within 30 days.
The Ritters refused to comply with this board order, and proceeded to file a lawsuit against the Association and each of the directors individually, seeking damages of at least $200,000 for diminution in the value of their units, as well as an injunction requiring the Association to fill all slab penetrations throughout the building.
The Decision in the Trial Court. The trial court entered a judgment in favor of the individual directors, but against the Association in the amount of $4,620. That amount was further reduced by 25% due to the Ritter’s negligence. The trial judge ordered the Association to fire stop the slab penetrations adjacent to the Ritters’ two units, but denied the Ritters’ request that the Association fill all slab penetrations throughout the building. Instead, the court ordered the Association to conduct a membership election to determine whether a special assessment should be imposed to fire stop all slab penetrations in the building. At that election the membership voted against the special assessment. Finally, the trial court ordered the Association to pay the Ritters’ attorneys fees and costs in the amount of $531,159. And, even though the individual directors prevailed on all the claims against them, the court refused to award attorneys fees against the Ritters.
The Decision in the Appellate Court. In Ritter & Ritter v The Churchill Condominium Association (2008), Court of Appeal affirmed the trial court’s judgment.
With respect to the individual directors, the court explained that “the rule of judicial deference set forth in the [Supreme Court’s] Lamden case provided protection from personal liability for the individual directors of a non-profit homeowners association.” Therefore, the individual directors were “shielded from personal liability” for the consequences of their good faith decision making.
However, the Court of Appeal found that Lamden rule did not similarly protect the Association in this particular case because “it does not follow and is not true that the same rule of judicial deference will automatically provide cover” to the association itself. Rather, a member of the association can recover damages from the association which result from a dangerous condition negligently maintained by the association in the common area.
The Dissenting Opinion. There was a strong dissenting opinion, which would have denied attorney’s fees to the Ritters and awarded attorneys fees to the prevailing individual directors. The dissenting opinion stated:
The Ritters asked for much at trial, but obtained little. They sued both The Churchill and the directors, alleging damages of $200,000 for the diminished value of their units while seeking an injunction requiring the defendants to spend potentially hundreds of thousands more to repair the slab penetrations in not just their unit but in every condominium in the complex. All they got was their own unit repaired at a cost of a few thousand dollars, a vote of the other unit owners refusing to fund the repairs of the other units, and relief from the fines imposed by the Churchill for failing to make their own repairs. All five directors were exonerated of liability while the Ritters were found to be 25% at fault for the events leading to this action….Given these obviously mixed results, I believe the trial court abused its discretion and should have determined there were no prevailing parties on the Ritters’ complaint.
Comments. The portion of this case which holds that the Supreme Court’s 1999 Lamden v LaJolla Shores Clubdominium Homeowners Assn. decision did not apply to and protect the association from liability is questionable. This is because Lamden was itself a case against an association, and the Supreme Court’s holding seems to signal its intent that associations should not be held liable in these types of cases. As the Lamden Court stated:
Where a duly constituted community association board, upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members, exercises discretion within the scope of its authority under relevant statutes, covenants and restrictions to select among means for discharging an obligation to maintain and repair a development’s common areas, courts should defer to the board’s authority and presumed expertise. Thus, we adopt today for California courts a rule of judicial deference to community association board decision making that applies, regardless of an association’s corporate status, when owners in common interest developments seek to litigate ordinary maintenance decisions entrusted to the discretion of their associations’ boards of directors.
will impose upon all of us beginning next year. The Governor has signed four bills directly relating to common interest developments, all of which will become effective on January 1, 2009. Here is a summary of these key new laws: