By: Laurie F. Masotto, Esq. (originally published Spring 1996)

Mr. Marcus Jones, an angry homeowner storms into the Board of Directors meeting for your Association. “I WANT YOU TO DO SOMETHING ABOUT MY NEIGHBOR!  He is sawing and hammering all day long in his garage, and he has delivery trucks coming and going to pick up and deliver his wooden “creations”.  My neighbor has two sidekick employees working for him, who park their jalopies in front of my house every day!  He has tried to sell me “junk” such as a table made out of logs, and has told me he is making “big bucks” by not having to pay for office space!”

The Association’s CC&Rs prohibit businesses to be operated from the residences.

In an era where more homeowners are electing to work from their home, the question presented by this scenario is one which is not uncommon.  To determine whether the operation of this type of business or other businesses violates an association’s governing documents and whether the provision is enforceable, the Board, together with legal counsel, should consider the following:

I.  Is The Activity A Business?

The Board should attempt to verify that a business is in fact being operated from the residence.  Some homeowners who engage in certain hobbies may be exempt from “business” restrictions, provided that they do not unreasonably interfere with other owners’ quiet enjoyment of their property.

II.  Intent Of The Restriction

A court will look to the language of the restriction to determine what the original drafter intended with respect to a business.  For instance, the documents may contain an outright prohibition with no exceptions, such as “residential use only”, or “no business, trade or commerce is permitted within the project”.  Restrictions similar to this one have been held to prohibit the operation of a beauty salon and law office from a residence, and use of residential property for commercial logging.   See, Biagini v. Hyde (1970) 3 Cal. App. 3d 877, 83 Cal. Rptr. 873; Greater Middletown Association v. Holmes Lumber Co. (1990) 222 Cal. App. 3d 980.  Other CC&Rs may allow certain types of businesses provided they meet certain requirements, i.e. no increase in traffic, no unreasonable noise, no employees located at the residence.

If no restriction on commercial use is contained in the governing documents, the association should look to local zoning/municipal ordinances to determine which businesses, if any, are permitted within a residence.

III.  Impact On Residential Character/Other Owners’ Enjoyment

The mere fact that a restriction prohibits a business will generally not alone provide sufficient grounds on which a court will enjoin its operation.  The Association will be required to show that the operation of the business materially interferes with and will cause irreparable harm to the residential character of the community, and that monetary compensation for this violation is an inadequate remedy and that such sum is indeterminable.

Where the business activity constitutes a nuisance, i.e. unreasonable noise, smell, or increased traffic so as to unreasonably interfere with other owner’s enjoyment of the property, a court may be more inclined to issue an injunction.   For instance, in the Greater Middletown case, the court alluded to the visual and noise impact of the commercial business which the association was attempting to enjoin.  In the Biagini case, the court found that the beauty salon, which involved up to six customers per day travelling to and from the residence, was detrimental and appreciably detracted from the residential character of the neighborhood.

In the above scenario, a court may find that this use detrimentally impacts the residential character of the community, since the business is visible and can be heard from other properties within the project, i.e. significant noise, an increase in traffic and congestion due to employees and delivery trucks travelling to and from the residence, and loading and unloading in the driveway.  However, in the case of a home office, for instance, where a person uses a computer and facsimile machine, makes telephone calls, has no employees and has no clients or vendors coming to the residence, except on an infrequent basis, this type of business would generally be deemed acceptable.  Likewise, there are some types of businesses, such as day care and the operation of a residential care facility for elderly persons, for which the California Legislature has expressly determined is allowed, regardless of the Association’s governing documents.

IV.  Reasonableness Of The Restriction

An Association can no longer assume that the prohibition of a business is automatic merely because the governing documents so provide.  The Association must evaluate each situation on a case- by-case basis.