Many condominium and homeowners associations (HOAs) have an architectural control committee (ACC). Oftentimes, the Board of Directors assumes the role of the ACC rather than having a separate committee. Where the governing documents give the Board/ACC discretion over proposed architectural/exterior changes within the association, what are the limits to that discretionary power?
In a recent court of appeals case from the fall of 2021, intervening homeowners who were neighbors to a home subject to years-long litigation with the HOA appealed a trial court’s dismissal of their attempt to intervene. These homeowners were disgruntled because they did not like the settlement that was ultimately reached between their neighboring homeowners and the HOA. The original dispute arose with the HOA suing a homeowner who tore down an existing home within the subdivision and did not follow the covenants with respect to rebuilding their home. The HOA filed suit against the building homeowners in 2014, and after three years of litigation and a turnover in the HOA Board of Directors, the new Board voted to settle with the homeowners rather than continuing the expensive litigation. The settlement agreement between the HOA and the homeowner granted a number of concessions to previous violations of the covenant (e.g., the homeowner was required under the governing documents to seek and obtain Board approval before changing the footprint of the home and height of the roof, for example, and did not). The settlement agreement between the HOA and the homeowner allowed these changes that were already made, much to the chagrin of the neighboring lot owners who intervened in the lawsuit. The intervening homeowners claimed that the HOA violated the governing documents in granting these concessions, and the court analyzed the documents in reaching its decision.
The trial court found in favor of the HOA and the homeowners who were parties to the settlement, stating that the intervening/neighbor homeowners did not state a valid claim and their case should be dismissed. The intervening/neighbor homeowners appealed, arguing that the HOA and the building homeowners did not comply with the governing documents because (1) the changes were not properly approved by the Board; and (2) the Board cannot approve modifications that are expressly prohibited by the governing documents. The appeals court reviewed the HOA documents as well as the parties’ arguments and ultimately determined that the governing documents give the Board discretion to approve proposed changes to homes and lots, and nothing that the Board approved was “expressly prohibited” by the documents. For example, there was nothing in the documents that said a homeowner could not increase the footprint of his home, and there was nothing in the documents that required the roof to be a certain height. The court found, accordingly, that these were areas where the Board had discretion and nothing improper was done with respect to settling the claims with the building homeowners.
This case demonstrates that where governing documents give the Board or ACC discretion to determine whether to allow modifications, those modifications that the Board/ACC approves will likely stand up in court if challenged. In contrast, if the Board or ACC gives its approval to a modification that clearly runs afoul of a restriction in the governing documents, that approval will be met with high scrutiny from the Court and is certainly subject to challenge. Boards should take caution when reviewing architectural control-type requests and seek the opinion of the Association’s attorney if what is being requested is a close call.