Without a doubt, one of the most common legal issues Boards face is trying to get its Association back “on track” when prior Boards have not diligently enforced its CCRs, Bylaws or Rules in the past.
I came to the realization years ago that if a new Board (or new attitudes) comes into office, and if they were forever barred from enforcing certain rules and covenants because a past Board did not, then that Association may might as well dissolve as there would be no possibility of it ever getting back to the intended “aesthetic standard” or “qualify of life” which the owners expected when they purchased.
I could not accept this result (of a Board being prevented to correct the past). I have advised Boards that they CAN start enforcing their Governing Documents – you just simply have to apply a few key concepts when doing so.
In addition, Utah finally adopted a standard for Board’s enforcement decisions that essentially “codifies” the Business Judgment Rule (“BJR”). The BJR simply is a principle of law that states if a Board made a reasoned, educated decision intended to be in the best interests of the Association, its “decision” will not be seconded guessed by the courts. This concept is reflected in the Acts for both condominiums and non-condominiums and I’ve cut and pasted the Community Association Act’s text (for non-condos) below.
However, the law provided in the Code section(s) below is not the focus of this entry but it is related to my following comments and is a very important statute for all Boards to know. Please contact our office at any time to discuss the “BJR.”
This entry is focused on the defense owners often raise when the Board attempts to enforce its CCRs and Rules against a member. I am sure many of you have heard one or more of the following defenses: “…you are picking on me;” “…you are not treating everyone the same;” or “…you can’t enforce this against me because no one has enforced it in the past.”
To be concise, the most common defense to enforcement are:
- Arbitrary application of the CCRs or Rules;
- Selective enforcement;
- Changed conditions;
- Statute of Limitations has passed; and
- Abandonment of the covenant.
We are going to be focusing on the defense of SELECTIVE ENFORCEMENT.
Please think back to how this blog entry started – if a (new) Board could not start enforcing covenants that may have been ignored in the past, then the Association will forever be on a downward spiral and never be able to correct past decisions. Surely this cannot be ‘the law?’
I should caution you, however, that if prior Boards have been negligent in their duties so much so that the character of the neighborhood has totally changed, and therefore, there is no value at all in enforcing the covenant(s) in the present, covenants can be abandoned. Nevertheless, THIS IS RARE. There must be no value to the community if the covenant is enforced to find abandonment. As an extreme example, if you have 20 homes in your community and the CCRs require a “cedar shake roof” but, because its expensive, the Board has turned a blind eye to those who have installed asphalt shingles and 18 of the 20 homes are not in compliance. If an ordinary potential buyer comes through the community and has no reason to believe the asphalt shingles are prohibited and, at this late date there no longer a “feel” that certain roof types are required so there would be no benefit in trying to enforce now, it is possible that the roofing covenant MAY be abandoned. If you are struggling analyzing what you can or cannot enforce, please contact us.
BACK TO THE DEFENSE OF SELECTIVE ENFORCEMENT AND WHEN THAT DEFENSE FAILS!!!
The following is a real life factual situation. A developer of a condominium community had granted permission to several owners to alter deck railings – is such a manner that they were not consistent with the type of materials/style that was required in the CCRs.
The (new) Board (after the developer had lost administrative control), wanting to bring back a uniform style and aesthetic to the community. They demanded that any owners that had received such “permission” must return their railings to the original construction.
A lawsuit resulted. The defense? SELECTIVE ENFORCEMENT of the Board by the demanding that only a few owners must now follow the CCRs (interestingly, as you have likely noticed, those owners even had ‘permission’).
The Trial Court ruled that the owners who had modified their railings must restore them to the original construction.
The Court of Appeals affirmed the Trial Court’s ruling.
FACT – the alterations made with the developer’s permission, before turnover, were the only alterations that had continued in the community.
IMPORTANT LESSON – An important lesson here is that the Association, ever since the (new) Board “inherited” the responsibility for enforcement within the community, it had consistently stopped any further violations of the CCR provision that stated “no alterations to the railings.” The court heavily relied on the concept that the (new) Board had CONSISTENTLY performed its duty even though it had done so only PROSPECTIVELY.
The courts ruled that although the developer’s enforcement had been lax in the past, the Association’s Board’s even, non-arbitrary and consistent prospective enforcement WAS NOT SELECTIVE ENFORCEMENT.
This opinion goes to show that a CCR or Rule that is consistently and uniformly applied generally does not constitute selective enforcement as many offended owners are quick to assert, EVEN IF SOME PAST VIOLATIONS WENT UNPUNISHED.
Our job at RICHARDS LAW is to help your Board adopt a uniform policy that will help you clean up past failed enforcement of a prior Board and thereby helping you overcome this defense.
Finally, in other situation, the Board decided to start enforcing its antenna restriction. This time, the offended owner(s) did not complain about the prior Board(s) not enforcing the antennae restriction, they complained that OTHER COVENANTS IN THE ASSOCIATION where not being enforced so the antennae covenant could not be either. THIS ARGUMENT FAILED AS WELL.
Please take a moment and read the following Code Sections to see how they ‘dovetail’ with the above court decisions. A future blog entry will focus on the BJR as described below. In particular pay special attention the text I highlighted in RED.
As always, the attorneys and team at RICHARDS LAW looks forward to helping your community regardless of the issue.
Sincerely, John Richards, Esq.; fellow CAI CCAL.
57-8a-213. Board action to enforce governing documents — Parameters.
(a) The board shall use its reasonable judgment to determine whether to exercise the association’s powers to impose sanctions or pursue legal action for a violation of the governing documents, including:
(i) whether to compromise a claim made by or against the board or the association; and
(ii) whether to pursue a claim for an unpaid assessment.
(b) The association may not be required to take enforcement action if the board determines, after fair review and acting in good faith and without conflict of interest, that under the particular circumstances:
(i) the association’s legal position does not justify taking any or further enforcement action;
(ii) the covenant, restriction, or rule in the governing documents is likely to be construed as inconsistent with current law;
(A) a technical violation has or may have occurred; and
(B) the violation is not material as to a reasonable person or does not justify expending the association’s resources; or
(iv) it is not in the association’s best interests to pursue an enforcement action, based upon hardship, expense, or other reasonable criteria.
(2) Subject to Subsection (3), if the board decides under Subsection (1)(b) to forego enforcement, the association is not prevented from later taking enforcement action.
(3) The board may not be arbitrary, capricious, or against public policy in taking or not taking enforcement action.
(4) This section does not govern whether the association’s action in enforcing a provision of the governing documents constitutes a waiver or modification of that provision.