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How Much Control Should an HOA have over its members?

How much control should an HOA have over its members? That disagreement is as typical as the national differences in politics.

On most occasions, when confronted with relatively rural property and larger lots, the owners seek more freedom and less subdivision control. Others, like some in new and close together subdivisions (an example is Swift Creek in Niceville), the buyers look for and appear to

appreciate very controlled relationships.

In general, the closer together people live, the greater the need for standardization in both building codes and in conduct of the residents.

There is no express provision in the law, or in many HOA founding documents, for a board of directors to grant a “variance” from strict requirements.

In addition, I know of no provision in any subdivision documents or in the law that permits any association board to grant a “variance.”

In that way, an association differs from a local government, which can grant a variance. However, a variance can be given by the government only upon a finding of a narrow set of conditions. Without a legal variance, a government cannot pass laws and then enforce them differently among citizens.

There is an analogy between the HOA to its members, and a parent to a child. You should have rules, and your policy must be that those rules be followed.

But you can’t be so rigid with those rules that strict compliance becomes ridiculous. Unfortunately, the more children (houses) you have, the more difficult it is to be the one in charge.

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While you can’t grant a variance, any board can elect not to enforce a rule. For instance, if you aren’t sure of the meaning of a statement in your documents, you don’t have to spend money to get a court to define an unimportant term.

If circumstances are so ambiguous that you don’t know whether a court would enforce something, you must protect an association’s

treasury. I wouldn’t advise you to waste money to make a point that’s not important.

“Courts have properly decided to give directors a wide latitude in the management of the affairs of a corporation provided always that judgment, and that means an honest, unbiased judgment, is reasonably exercised by them,” according to a ruling in Otis & Co. v. Pa. R. Co., 61 F.Supp. 905, 911 (E.D. Pa. 1945). “The business judgment rule is a policy of judicial restraint born of the recognition that directors are, in most cases, more qualified to make business decisions than are judges,” says a ruling in Int’l Ins. Co., 874 F.2d at 1158 n.20.

Florida courts have extended business-judgment deference to common interest associations “if [a] decision is within the scope of the association’s authority and is reasonable – that is, not arbitrary, capricious, or in bad faith.”

“[T]he ‘business judgment rule’ protects the association’s board of directors when making business decisions in good faith.” (Citation omitted.) The question of reasonableness under the business judgment rule is an issue of fact. Miller, 284 So.3d at 537 (citation omitted). See 304 So.3d 1268.

Courts expect every association to use the “business judgment rule” in enforcing its documents. That rule requires the board to do what is in the association’s best interest, depending on the facts and circumstances known to the board when a decision is made.

There is case law that a board of directors has the authority to change its direction and to declare that all future violations will be prohibited.

To do that, the board would have to adopt a rational, consistent future policy and announce it. That policy change, particularly one

poorly rationalized, would require almost unanimous application to be enforced. More importantly, the more frequent and pervasive the previous violations of that rule, the more unlikely a court would enforce that change, even if your board announces a new policy of uniform enforcement.

An HOA board has a fiduciary relationship with its members. That does not mean it has to enforce every rule or punish every violation. Some rules are not worth what they cost, and sometimes enforcement is not worth the expense or resistance it causes.

Your fiduciary relationship does not mean, for instance, that you have to file liens or lawsuits in every instance, and your documents do not require that you do that. It does mean that you try to enforce your covenants in every reasonable way, unless there is a powerful argument to do

otherwise. If there is such an argument, a board may, in fact, properly exercise its fiduciary duty by doing nothing.

The board can decline to take action if that’s in the association’s best interest, considering all matters known to the board. A part of the rationale for that is that each member may bring an action against another member if they feel strongly about a violation. The mediation requirements in Chapter 720 would still apply, and the winner of litigation would generally have his legal expenses paid by the loser. The association would only be involved if someone joined the association in the lawsuit.

The board should then decide whether a specific conduct is in fact a violation and, if it is, whether the behavior is of general importance to all

members or whether the offense is primarily a personal matter between a limited number of members.

Some disputes will not invoke the association’s involvement. If the board finds itself stepping back from enforcing any particular covenant on a

consistent basis, it should probably make reasonable efforts to amend that rule.

Chickens In An Unwanted Coop

In a quiet suburban neighborhood, whose name I will keep out of the article, a debate over chickens has become contentious, leaving some residents at odds with one another and the homeowners’ association (HOA) in the middle.

The dispute centers around whether to allow or remove chickens from the community, and whether or not the fowl in play predated the rule banning them from the neighborhood.

 

Chicken mother with chickens. Poultry in individual hen house.

The contentious issue has generated strong opinions on both sides of the coop. On one hand, some argue passionately for keeping the feathered residents, while others advocate for their removal. As I noted, one key point of contention is the historical context. Some residents claim that these chickens were present before the HOA’s covenants were amended to prohibit them. This raises legitimate questions about whether the covenant prohibition could be enforced legally.

I believe enforcing the covenant might be challenging if the chickens indeed predate the amendment. Either way, the board of directors faces a dilemma. Should they take legal action to remove the chickens, or should they exercise discretion and refrain from litigation, considering the dispute might be more personal than of general interest?

The owner of the chickens may have strong defenses if the matter were to go to court. The unpredictability of the outcome in a courtroom adds to the situation’s complexity. I would advise the HOA to allow the homeowners involved to use the authority of the covenants to file actions between themselves, absolving the HOA from direct involvement, if possible. A part of this analysis might involve the size of each lot and the kinds of chicken. (The lots in this subdivision are all more than one acre).

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Interestingly, this situation underscores the HOA’s discretion not to file actions on behalf of the entire association. Refraining from filing actions on behalf of the HOA highlights the ability of any homeowner deeply affected by another’s covenant violation to initiate his own private action. If successful, the offending homeowner would be required to reimburse these expenses.

The board’s decision, or lack thereof, communicates a message about the perceived importance of the violation. It sets a precedent for how similar violations will be treated in the future unless the board provides a clear and logical rationale for its actions or inactions in its meeting minutes.

While this approach may complicate decision-making for the association, it emphasizes the need for transparency and consistency in HOA governance.

In an environment where right and wrong aren’t always clear-cut, documenting decisions and their underlying reasons is crucial.

In the end, this chicken-centric dispute highlights the challenges and complexities that can arise within homeowners’ associations. It serves as a reminder of the importance of clear and reasonable covenant rules and the need for thoughtful, transparent governance in community living. Disparate enforcement of rules is the number one defense to any effort by an HOA in an effort to enforce a specific rule. Your written rationale for any decision is always important tomorrow.

D. Michael Chesser is a shareholder at Chesser and Barr

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