This case involved a dispute between a homeowner member of a property owners association (Owner) and the association (Association) over a decision by Associations directors not to take legal action against another homeowner under the business judgment rule. The dispute was over alleged improvements that were constructed on the homeowners property without the required approval by Associations Architectural Review Board. Once taken to court, the Association not taking action was protected by the business judgment rule.

Factually, the owner that constructed the improvements on his property had originally obtained approval from Associations Architectural Review Board, but during the months after obtaining the approval, the owner changed and revised the approved plans and continued with the construction of improvements that had not been approved. Over a year after the revised improvements were completed, Association learned of the changes that deviated from the approved plans and notified the owner of the alleged violations. The owner responded to Association by providing information from an engineering and construction firm, and from a local county building official that purportedly confirmed that the improvements were not in violation of Associations architectural restrictions. After reviewing the information that had been submitted, Associations board of directors approved the improvements that had been constructed.

Owner then filed suit against Association seeking injunctive relief to compel Association to take action to enforce its architectural restrictions against the offending owner. In the lawsuit, Owner alleged that Association breached its obligations under the governing documents by making a business judgment decision not to proceed against the offending owner.

In response to the action filed by Owner, Association contended that the enforcement of its governing documents was discretionary, not mandatory, and that it had properly exercised its business judgment in making its decision not to take action against the offending owner. The trail court agreed with Association and found that its decision not to take action was protected by the business judgment rule. Owner then filed an appeal of the trial courts judgment.

The appellate court ruled that the applicable test when applying the business judgment rule to the decisions made by a property owners association is: (i) whether the association had the contractual or statutory authority to perform the relevant acts; and (ii) if so, whether the directors acted reasonably. The court concluded that it must give deference to the decisions of an associations board that are both within the scope of the boards authority and which are reasonable. In applying this test to the facts of the case, the appellate court found that the business judgment rule applied to Associations decision not to take action against the offending owner and affirmed the trail courts judgment.

Florida Appellate Court decision (July 31, 2019).

See case decision: Miller_v._Homeland_Prop._Owners_Ass’n