Condo Court

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 In the unpublished case of Martin v. Bridgeport Homeowners Association (decided April 7, 2009), the California Court of Appeal ruled in favor of the Association.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