HOA LAW - Recent Decisions Support HOA Board of Directors

            HOA Board Meetings Are Legally Protected Activity

            In the recent decision of Nancy Ann Lee v. Silveira, the court of appeals ruled in favor of the 6 directors who were sued by 3 other directors on the board regarding the majority voting to approve the renewal of the HOA's management company contract, and approving a bid for construction of a roofing project.  The minority directors asserted a cause of action for declaratory relief and in effect, were attempting to have the court decide between the views of the two camps of directors on the board regarding the disputed HOA issues.

            The majority directors filed a motion under Code of Civil Procedure, section 425.16 (statute that provides for an "anti-SLAPP" motion against a Strategic Lawsuit Against Public Participation lawsuit) contending that the claim arose from an act in furtherance of a person's right of petition or free speech, which includes any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest, or any other conduct in furtherance of the exercise of the constitutional right of petition or free speech in connection with a public issue or an issue of public interest.  

            The Court recognized that duly noticed board meetings of a HOA meet the statutory definition of a "public forum" within the meaning of the anti-SLAPP statute because they serve a function similar to that of a governmental body.

            The Court also recognized that the acts of the director defendants concerned matters of "public Interest" as defined by the statute.

            The acts complained of also involved director defendants' decisionmaking on "public issues" (i.e., the roofing project and the management contract) that divided the board.  The plaintiff directors complained that the defendant directors engaged in wrongful conduct as a result of how they voted in board meetings on the "public issues" affecting the HOA members.

            Because the defendant directors made a prima facie showing that the plaintiff's complaint arose from protected activity under the anti-SLAPP statute, the plaintiff's were required to show that their declaratory relief claim concerned an actual controversy involving justiciable questions relating to the rights or obligations of a party.   The Court concluded that the plaintiffs could not show an actual controversy on their claim that the majority block allegedly failed to obtain the necessary bids in connection with the roofing project or to renew the management contract.

            This case not only illustrates the extent to which dissident minority directors can feel so strongly about their opinions of board decisions that they will file legal action against the other directors, but it also confirms that the courts will enforce the protections provided to defendant directors when they are sued regarding their good-faith votes on HOA business during board of director's meetings.

            Homeowners Cannot Encroach On HOA Common Area Without Permission

            In the recent decision of Nellie Gail Ranch Owners Association v. McMullin, the appellate court affirmed the trial court's judgment in favor of the Nellie Ranch HOA to:

            - quiet title in favor of the HOA to a portion of common area on which McMullin had built a retaining wall and other improvements without the written consent of the HOA as required by its CC&Rs and Architectural Review Committee Guidelines that required prior written approval before construction of significant alterations to any improvements on their property,     

            - require McMullin to remove the wall and improvements at his expense, and

            -  pay the HOA more than $190,000 in attorneys fees and costs.

            McMullin's claim of adverse possession was rejected, even though McMullin argued the common area had no value and no property taxes were assessed for it.  The court found that HOA common area's have value, and the taxes on the common areas was assessed to the individual property owners in the HOA consistent with the law concerning property taxes on common areas owned by HOAs (under Rev. & Taxation Code, section 2188.5), and because McMullin did not pay them for the disputed common area for a five-year period, he did not satisfy that essential element of the adverse possession claim. 

            Although McMullin requested an equitable easement because he preferred to pay monetary damages to the HOA and have his retaining wall remain, the court agreed that a mandatory injunction requiring McMullin to remove the encroachment in the form of the retaining wall and improvement was appropriate because McMullin did not act innocently by his failure to disclose the true nature of his building plans and he began construction knowing that he did not have the necessary approvals, and the balancing of the hardships greatly favored the HOA as McMullin's construction had denied the HOA the common area it previously owned free of any adverse claim from McMullin.

            This is a significant decision in favor of HOAs, and confirms that the courts will support HOAs in legal actions filed to uphold the CC&Rs and Architecture Rules, and will find civil liability against members who deceive the HOA and build on common area without written consent from the HOA.  Prudent members should be careful that they comply with the rules set forth in this decision, as it will likely be cited by HOAs in future litigation regarding these type of issues.