If you live in a common interest development, it is inevitable that there are going to be disputes between neighbors. Because such disputes typically do not involve issues concerning the associations common area property, HOA board decision frequently elect not to expend their time or utilize association resources to become involved in the dispute, even if the conduct being reported constitutes a violation of the associations governing documents.
HOA board decision to not get involved in neighbor-to-neighbor disputes frequently precipitate costly litigation between the neighboring parties and/or the association for failing to take action to enforce the associations governing documents. The associations risk of liability for its inaction will depend on how the association made the decision not to get involved.
Common Neighbor-to-Neighbor Disputes.
The circumstances that create neighbor-to-neighbor disputes vary from case to case, but some common causes of such disputes are:
- Noise issues that can be created from such things as playing loud music, walking on hard surface floors, dogs barking, or kids playing;
- Smell issues caused by such things as cooking, smoking cigarettes, cigars, and marijuana;
- Criminal activity;
- Conditions on property such as walls, trees, paint colors, and items placed on property.
Investigation of the Complaint.
When an HOA board decision or manager receives a complaint, it should be investigated to determine if the complaint has merit and whether there has been a violation of the associations governing documents. The investigation does not have to be conducted by the directors themselves. The directors can assign the responsibility to the associations property manager, maintenance personnel, or experts who report their findings to the board.
Action by the Board.
The results of an investigation of a complaint should be considered by the board of directors at a proper meeting, or hearing, at which the involved parties have an opportunity to be heard. The procedural requirements for such hearings, which are typically set forth in state statutes and/or an associations governing documents, should be followed to the letter and the directors findings should be documented in minutes of the meeting. Following the meeting, a letter or notice setting forth the boards findings should be sent to the involved parties.
If the board determines that there has been a violation, the board should impose an appropriate fine and/or suspension of privileges on the offending party in accordance with the associations schedule of fines and policy concerning the imposition of fines and discipline. If the offending conduct warrants it, the board should seek an appropriate injunction through a court action designed to prevent continuation of the conduct.
Business Judgment Rule.
Proper decisions made by the HOA directors will generally be protected by the business judgment rule. The business judgment rule has been developed over time through court judgments in cases that involve challenges to decisions made by HOA directors. The rule has established a presumption that the decisions made by HOA directors are based on sound judgment resulting from the directors having acted in good faith, on an informed basis, and in the honest belief that the action taken was in the best interest of the association. Under the rule, courts will uphold board decisions so long as they represent good faith efforts to further the purposes of the association, are consistent with applicable statutes and the governing documents, and comply with public policy.
The presumption under the business judgment rule can be rebutted by a factual showing that the directors action involved fraud, bad faith or gross overreaching. Thus, under the law, an associations directors can make incorrect decisions that are contrary to what a reasonable person would have done under similar circumstances and still be protected by the business judgment rule, so long as the directors acted in good faith and used their best business judgment with a view to the best interests of the association and all of its members.
For the business judgment rule to apply, HOA directors must actually make a decision. Inaction on the part of the directors will not be protected, but weighing the facts and making a conscious decision to take no action will be protected because a well-reasoned decision to refrain from taking action is different from inaction. An association will not be shielded from liability if its directors merely chose to ignore problems.
Adopting a Policy for Handling Neighbor-to-Neighbor Disputes.
Because the composition of a board of directors frequently changes, associations should have a written policy that spells out how the associations successive boards will handle neighbor-to-neighbor disputes. In some cases, such a policy may be specified in the associations existing governing documents such as the declaration/CC&Rs, or the bylaws.
Each sitting board of directors should be aware of the provisions contained in their associations governing documents concerning the HOAs involvement in neighbor-to-neighbor disputes and if there are insufficient provisions, the documents should be amended to include appropriate provisions, or alternatively, a separate policy concerning the handling of neighbor-to-neighbor disputes should be formulated and adopted. A sample of such a policy and a resolution by an associations board of directors to adopt the policy may be viewed via the links following this article.
In conclusion, when confronted with a neighbor-to-neighbor dispute situation, an HOA board decision should not follow a blanket policy to not get involved. Taking such a position will typically frustrate and anger the complaining party, create dissention, and could result in the association being sued for not performing its duties. A proper decision concerning involvement should be made following a thorough review and consideration of the facts of the case, an in accordance with sound business judgment, and when appropriate, consultation with the associations legal counsel. Given the risks of exposure to costly litigation and potential liability for not becoming involved in certain neighbor-to-neighbor disputes, associations should adopt policies concerning neighbor-to-neighbor disputes that include an appropriate level of involvement on the part of the association in trying to resolve the dispute before it ends up in court.
Links to Forms:
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Use these to fulfill the action steps from this Article.
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