Falling In The Cracks
When faced with a homeowner association maintenance or repair issue, the starting point is to determine whether the HOA has the duty to maintain or repair. This may not be as simple as it sounds. While the governing documents generally define the common elements and repair responsibilities, sometimes the item in need of repair may fall into a gray area. For example, while the governing documents may state that the HOA has the duty to maintain the floor between unit levels, what happens when a unit owner requests that the HOA fix his squeaky floor? The answer depends: Is the squeak related to a structural problem or the hardwood flooring installed by the unit owner? If it’s a defect in the structure, the HOA fixes, if the flooring, it’s typically on the unit owner.
To sort this all out, it is helpful to create a matrix that can serve as a quick reference guide for determining the maintenance and repair responsibilities of the HOA versus owner. The matrix should conform to requirements of the governing documents. (For a sample Areas of Responsibility Policy, see www.Regenesis.net)
When it comes to repair requests, the board should have a standard policy of prompt action prioritized by urgency: a broken pipe is urgent, a squeaky floor much less urgent. Sidewalks that are heaving and creating a tripping hazard require quicker action than scheduling the repainting of signs or buildings. Reaction time should fit the situation. If not urgent, repairing within a few weeks is reasonable.
The importance of prompt response was made clear by a jury verdict in the Los Angeles Superior Court in the case of Mary Jamison Moller v. The Atherton Homeowners Association. The jury found the HOA liable for $495,000 in water damage to a resident’s unit. The resident had made repeated complaints to the board in of water damage, mustiness and moistness in her unit. The board failed to act for three years, when an architect was hired to design a drain system to alleviate the problem. By then, the unit condition had grown worse, and the new drain system was not installed properly. The resident developed health problems, allegedly because mold and mildew began to grow inside the unit’s walls. Among other things, the jury found that the board was negligent and had breached its fiduciary duties. The resident was awarded damages for pain and suffering and the trial judge ordered the HOA to raise $250,000 to pay for repairs to the unit.
How soon should a board take action to make a repair? At least one court has held that an HOA must perform a repair within a “reasonable time”. What constitutes a “reasonable time” depends on the circumstances. In Lemon v. Golf Terrace Owners Association, the Supreme Court of Alabama found that the HOA acted within a reasonable time when it took over three years for a re-roofing project. The resident in that case had a serious roof leak in his unit and sued the the HOA for failing to fix it within a reasonable time. The roofs in the project were over 16 years old and defectively designed.
More and more roofs began to deteriorate and leak. The board appointed a committee to develop a plan to deal with the roof problem and an architect was hired to prepare a design. The board was constrained in its actions, the Court noted, because it was required by the governing documents to submit the new design for a vote of the owners. Once approval was obtained, the board then had to secure competitive bids from roofing contractors, one of which then had to again be submitted for owner approval.
The Court expressly acknowledged that “the delay in the construction appears to have resulted from the fact that the board governing documents for making extensive had to follow the procedure set out in the structural alterations to the roofs. The record affirmatively shows that the board took the owner’s problem seriously.” The Court then went on to document extensive efforts undertaken by the HOA to try to stop the leaks in the owner’s unit while awaiting construction of the new roof. So, as long as the board’s repair efforts are constrained by the governing documents, “reasonable time” could be months or even years.
It has long been presumed that the “business judgment rule” would usually insulate a board from liability for a business decision made in good faith, so long as the board members acted on an informed basis, were disinterested and independent, and were reasonably diligent in informing themselves of the facts. However, a dent was placed in this “shield” from liability by a California appellate court in Lamden v. La Jolla Shores Clubdominium Homeowners Association (1998). In that case, the complex experienced a major termite problem and an exterminator recommended fumigation to control it. The board decided against fumigation and decided to spot treat the infested areas. A unit owner sued alleging that the HOA should fumigate instead of spot treat. The board defended the lawsuit by stating that its conduct was in conformity with the “business judgment rule”, and the trial court agreed, holding that the board had acted in good faith and had a rational basis for the decision to reject fumigation.
On appeal, however, the trial court’s decision was reversed. The appellate court essentially held that the “business judgment rule” is not the applicable standard when reviewing maintenance and repair decisions. The court reasoned that the HOA was “for all practical purposes” the complex’s landlord, and must, therefore, exercise due care for the “tenant’s” property. The court stated that this relationship between the HOA and the unit owner required that the HOA was to exercise due care to protect the co-owner’s unit from undue damage. The court held that the board’s conduct should be scrutinized under a standard of reasonableness rather than good faith. Accordingly, boards should also consider whether their maintenance and repair decisions are reasonable and prudent, in addition to being made in good faith and represent an informed business judgment.
Like other duties, the board must take its maintenance and repair duties seriously and take prompt action when possible. Neglecting a needed repair can have deleterious consequences.