It is important that those sitting on Boards and committees that govern HOAs and COAs have a good working knowledge of legal principles applicable to decisions approving or disapproving proposed homeowner construction projects in their communities.  This blog will not be an exhaustive treatment of this subject, but it will provide an overview by considering two relevant Washington Court cases.

RISS v. ANGEL – 1997 Washington Supreme Court Case

The Riss v. Angel case is an important legal precedent in Washington that involved an HOA Board and the membership voting to disallow the construction of a home in the community that all the Board members and a majority of the community thought violated the CCRs.

A lawsuit was filed to resolve the dispute, which lawsuit ultimately reached the Washington Supreme Court.  The Supreme Court ruled against the HOA and in favor of the lot owner who wanted to build a home according to the design rejected by the Board and membership.

The Riss Court clarified the legal standard to which discretionary decisions (those where the relevant CCRs provisions permit discretion) by HOAs and their representatives.  The Court ruled that even discretionary decisions by the Board or the entire HOA (by member vote) must reflect “good faith” and be “reasonable” (that is, reflecting “such care as a reasonably prudent person in like position would use under similar circumstances”).

In ruling in favor of the house-building member, the Court ruled that the rejection by the Board and the HOA membership was not “reasonable” and specifically noted that in rejecting the proposed building plans, the Board (a) had not done an adequate investigation regarding the proposed home and its compatibility with, and impact on, the neighborhood and (b) relied on inaccurate information regarding the proposed structure.

A significant further aspect of the Riss Court decision is that the Court awarded to the prevailing member damages and attorney’s fees totaling over $200,000 (a considerable sum both now and back in 1997) that was payable by the Board Directors and HOA members who voted to reject the proposed project.  This judgment was entered against those individuals personally such that the prevailing house-builder could collect the judgment amount from any or all of them.

The Riss Court also announced some general rules regarding the interpretation of CCRs for planned communities stating in this regard that courts will “place special emphasis on arriving at an interpretation that protects the homeowners’ collective interests” while at the same time seeking to “ascertain and give effect to those purposes intended by the covenants [CCRs]” as drafted.  The HOA in the Riss case may not agree with how those principles were applied in that case, but they are nevertheless guiding principles courts will follow when interpreting disputed CCRs provisions.

WIMBERLEY v. CARAVELLO – 2006 Washington Court of Appeals Case

Several years after the Riss decision, the Washington Court of Appeals heard another case involving a dispute over whether a structure built by an HOA member violated the CCRs.

In the Wimberley case the Court of Appeals considered an unusually tall (3-story) garage structure built by an HOA member that the Board of Directors had ultimately approved, because the CCRs included no height restrictions (or view protection) applicable to such structures.  Instead the relevant CCRs only stated:

“Only one and only single-family residences and outbuildings auxiliary thereto (such as garages, wood sheds and the like) may be constructed or permitted to remain on each single-family residential lot in the subdivision.

Buildings on residential lots shall be simple, well-proportioned structures.”

The Wimberley Court noted that unlike the Riss case the HOA in Wimberley was not a party to the lawsuit because (a) no claims had been made against the HOA in the lawsuit and (b) the CCRs authorized enforcement action by individual HOA members.  The Wimberley lawsuit had been filed by an individual HOA member.  That being the case, the Wimberley Court ruled that there was no need to give any deference at all to the HOA Board’s determination that the garage structure complied with the CCRs.  Thus, the Court determined that it could freely substitute its own judgment for that of the HOA Board that had approved the garage project.

The lower court in Wimberley had ruled in favor of the HOA member who had complained about the 3-story garage and granted an injunction requiring the garage-building member to remove/rebuild the offending garage so as to not detract from the neighborhood and not significantly interfere other members’ views (even though views were not specifically protected in the CCRs).

The Court of Appeals in Wimberley upheld the lower court’s decision and approved the injunction requiring the removal/rebuild of the garage.  The Wimberley Court emphasized in upholding the injunction that, while this was perhaps a harsh result for the garage building member whose project had originally been approved by the HOA Board, the garage building member had continued with the project even after being put on notice by the complaining neighbor that the garage violated the CCRs and a lawsuit was being filed.  That factor lent support to the harsh remedy imposed and eliminated in the eyes of the Court the “balancing relative hardship” equitable principle that is sometimes invoked to avoid rulings that impose extreme financial hardship on violators regarding unintentional and typically minor violations.

Adding insult to injury the Wimberley Court also required the garage builder to pay the legal fees incurred by the complaining neighbor – again a substantial sum.

FINAL THOUGHTS

The legal principles that apply to disputes over proposed (or completed) construction projects in HOA and COA communities are complicated and often not intuitive.  Association Boards should wisely seek legal advice when facing difficult decisions/issues relating to building projects to assess potential legal ramifications for individual Board members and the Association as a whole.

We can help.