Law Review: HOA decision given judicial deference (and a special election recommendation) | SierraSun.com

Law Review: HOA decision given judicial deference (and a special election recommendation)

Jim Porter
Law Review

Our resort community is loaded with homeowners associations – governed by a law known as the Davis Stirling Act. Being on a homeowner board is often a thankless job, but California courts have made it easier.

‘NO BUSINESSES ALLOWED IN SUBDIVISION’

In 1966, a 28-lot residential subdivision known as Los Robles Hills Estates was created in the city of Thousand Oaks. The Los Robles CC&Rs included this restriction: “No lot shall be used for any purpose (including any business or commercial activity) other than for the residence of one family and its domestic …” Seems clear enough. Even though most of us mountain folk do not have domestic servants.

Notwithstanding that restriction binding on all owners, the Ketelhuts purchased a lot and planted a vineyard of 600 plants, amazingly much of the vineyard encroached into the Los Robles common area.

The Ketelhuts began harvesting grapes, having them shipped to a winery and made into wine which they then sold over the internet. They advertised tastings at the vineyard. Their wines ranged in price form $27-$42 a bottle. Ketelhut wines were featured at a few local restaurants. The Ketelhuts tax filings classified the vineyard as a business. Looks like a business to this wine lover (and the dissenting justice).

NEIGHBORS SUE HOA

Several neighbors sued the Los Robles board and the Ketelhuts, arguing their vineyard and making of wines was a business in violation of the CC&Rs. Three of the five board members determined the Ketelhuts “growing grapes was part of their landscape plan” and the vineyard did not affect the residential character of their community. Both comments off the mark in my opinion.

The trial court ruled for the association. The decision was appealed.

HOA GIVEN BENEFIT OF THE DOUBT

The Second District Court of Appeal relied on the Supreme Court case of Landen v. La Jolla Shores Association where the Supreme Court adopted a rule of judicial deference to decisions made by homeowner boards. I apologize for the long quote but this is the standard for HOA boards:

“[We] adopt today for California courts a rule of judicial deference to community association board decision making that applies … when owners in common interest developments seek to litigate ordinary maintenance decisions entrusted to the discretion of their associations’ boards of directors.

Where a duly constituted community association board, upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members, exercises discretion within the scope of its authority under relevant statutes, covenants and restrictions … discharging an obligation to maintain and repair a development’s common areas, courts should defer to the board’s authority and presumed expertise … A differential standard will … foster stability, certainty and predictability in the governance and management of common interest developments.”

The point of this column is to illustrate the deference courts give to HOA board decisions.

BUILDING IN COMMON AREA

The Court also ruled that because the common area was owned by the association and not by lot owners each owning a share, the board had the authority to allow the vineyard encroachment into the common area. Important point.

MARCH 26 SPECIAL ELECTION

Five candidates are running to replace Ted Gaines for State Senator in District 1 — our district. I recommend a vote for Brian Dahle, a reach-across the aisle Republican.

Jim Porter is an attorney with Porter Simon licensed in California and Nevada, with offices in Truckee and Tahoe City, California, and Reno, Nevada. Jim’s practice areas include: real estate, development, construction, business, HOA’s, contracts, personal injury, accidents, mediation and other transactional matters. He may be reached at porter@portersimon.com or http://www.portersimon.com.