Monday, November 01, 2010

HOAs don't enjoy blanket immunity for maintenance decisions, California Court of Appeal rules

In a ruling filed filed Oct. 29 in Affan et al v. Portofino Cove Homeowners Association, G041379, the Fourth District of the California Court of Appeal overturned a trial court ruling dismissing claims brought against a condo HOA and its management company by an owner alleging the defendants breached their duty to maintain and repair the common area plumbing, causing sewage to back up into the plaintiff's unit.

The trial court dismissed the suit citing a 1999 ruling by the California Supreme Court in Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249. In that case, the California high court applied the business judgment rule to HOAs, holding that courts are to defer to the "presumed expertise" of HOA boards when it comes to their decisions on maintaining common areas. That means these decisions by HOA boards are not subject to second guessing by the courts when owners challenge them.

But in Affan, the Court of Appeal found the HOA failed to establish the factual prerequisites for applying the deference rule. In addition, it held, since the HOA manager is not the HOA, the rule does not apply to the manager.

Here's a key excerpt from the ruling:
It is important to note the narrow scope of the Lamden rule. It is a rule of deference to the reasoned decisionmaking of homeowners association boards concerning ordinary maintenance. It does not create a blanket immunity for all the decisions and actions of a homeowners association. The Supreme Court's precise articulation of the rule makes clear that the rule of deference applies only when a homeowner sues an association over a maintenance decision that meets the enumerated criteria.
The full decision can be read here.

5 comments:

Anonymous said...

Why oh why are Akil and Cenan Affan trying to hurt their neighbors?

"It's hard to divorce the interests of the owners from the interests of the association. Because by definition, the association are the owners."

The homeowners --including Mr. and Mrs. Affan themselves -- will be burdened with the costs of their expensive litigation against their neighbors.

Anyone who has seen the movie Alien knows that you can't do anything to remove the face-hugging parasite, because it has a wonderful defense mechanism. HOAs are structured on the same principle -- any action that harms the parasite endangers the host.

The Affan's should keep in mind that "since HOAs are very local and small, participants are often neighbors and hence have incentive to settle disagreements in a civil manner." Instead of engaging in expensive litigation that will damage the sense of communisty that the association has worked hard to create, they should have behaved in a more respectful, neighborly, and civil manner toward the volunteer Board of Directors for the maximum common collective-interest good.

jb said...

This clarification of Lamden is a big deal since Lamden is cited at the trial court level to justify any action that is taken by a Board.

I am currently involved in a Hawaii matter, at the Intermediate Court of Appeals, which involves using Lamden as a justification for taking no action without any investigation.

Condo comrade said...

Anonymous:

But in the spirit of communisty, shouldn't the collective help its comrade avoid having to live in sewage?

Beth said...

This decision was quite interesting and very clearly written.

Sounds like the condo boards were playing "hot potato," passing off expensive maintenance to a future board rather than facing owner outrage. It's easy to see how they could fail to perform maintenance over 10 years or more. Reason #1455 to not buy a condo.

pvtgov said...

This case is important for 2 reasons:

1. It overturns the treatment that HOA boards know better -- and that’s the prime justification for non-interference – but when you consider the HOA not as a special organization with special “trade knowledge” but as a government, , then there justification that the HOA board knows better starts to weaken. With respect to a the HOA board as proper government to justify deference to a “legislative” leadership”, that fails the “smell test” also.

2. It demonstrates that yes indeed negative precedent that denies freedoms and constitutional protects can be overturned – this is very important since HOA had there way and set so many favorable HOA precedents that they must be overturned as unjust and prejudicial decisions.