by: Johanna R. Deleissegues, Esq. (originally published Fall 2006)

The Utopia Homeowners Association has over 1000 homes and is located in California.  The Utopia Architectural Review Committee (“ARC”) is a separate committee from the Association’s Board of Directors.  The Board and the ARC strive to maintain the highest aesthetic standards for the young community.  The ARC is made up of Mr. Headstrong, Mr. Waffler and Mr. Reasoner.  Occasionally, the Association’s attorney, Ms. Justice-Smith, joins the ARC meetings.

New homeowner, Mr. Member, has submitted an application for a masonry wall to replace his wooden fence.  He proposes to install a wrought iron gate, prominently featuring two large gold lions.

Mr. Headstrong immediately, and loudly, rejects the application.  “Those lions are awful and don’t fit in.”  Mr. Waffler is inclined to agree. 

Mr. Reasoner says, “But the masonry wall is fine, it’s just the gate you don’t like.” Mr. Waffler agrees.

Ms. Justice-Smith interrupts, “There have been changes in the law I would like to review.”  She begins to describe the role of the ARC.

The Dolan – King Standard:  Architectural Review Committee has Great Authority

“The ARC’s decisions greatly impact the look of the Association.  At the same time, they are also the committees that homeowners are most likely to complain about.  The ARC tells homeowners what they can and cannot do to their ‘castle’.  It’s very hard for homeowners to accept this fact.”

“Take the gold lions for example; it probably has deep personal meaning to Mr. Member.  It appears, however, the ARC doesn’t want to hear it.”

Both Mr. Reasoner and Mr. Headstrong nod their heads.

“The Dolan-King court, in reviewing an architectural application decision, held that the judicial review standard when reviewing the decision of an Association was to ‘consider the reasonableness of the restrictions by looking at the goals and concerns of the entire development.’” (Dolan-King v. Rancho Santa Fe Association (2000) 81 Cal. App. 4th 965, 975.)

The Dolan-King court found that the association’s review committee and board were empowered to render judgments in that particular situation because the language of their CC&Rs allowed the association to review property improvement applications based upon subjective and objective criteria.  (Id. at 976.)  The Dolan-King court opined that the association’s declaration granted the board and architectural review committee broad authority to apply standards that are inherently subjective.  (Id. at 970.) The association, however, cannot act unreasonably or arbitrarily.  (Id. at 976.)

After reviewing the Association’s documents, Ms. Justice-Smith proclaims, “Amazing, Utopia’s documents identically match the language of the documents of the Association in Dolan-King.  We need look no further into the CC&Rs.  The Association has the authority to make decisions based upon subjective and objective criteria.”  She closed the file and pulled her statute book out of her briefcase.

Mr. Reasoner looked puzzled and asked, “What is the difference between an arbitrary decision and a decision made on our subjective criteria?”

Ms. Justice-Smith smiled.  “That is a fine line, but it’s explained in Dolan-King.  According to the Dolan-King court, ‘A restriction is arbitrary when it bears ‘no rational relationship to the protection, preservation, operation or purpose of the affected land.’  (Id. at 976, internal citation omitted, emphasis added.)

“I still don’t understand,” said Mr. Reasoner.

“It might help, to discuss this difference in the context of the Association’s color palette.  As you know, last year the committee went to great lengths to establish an approved color palette for fences and gates in the Association.  These approved colors are generally an ‘earth tone palette’.”  Ms. Justice-Smith paused.

“Here, the ARC is making a subjective decision about Mr. Member’s fence based upon the aesthetic standards of the Utopia Homeowners Association.  The gold lions on the gate are excess ornamentations when compared to other gates in the community.  Also, gold is not a color in the Association’s approved color palette.  Overall, that the masonry fence is fine, but the gold lions do not meet the aesthetic standards of the community.”

“An example of an arbitrary response by the ARC would be if the ARC told Mr. Member he could not even have his gold lions on the inside of his solid fence, where they would not be visible from the common area, as a way of punishing him for applying for the gold lion gate.”

Ms. Justice-Smith closed her briefcase and opened her statute book.  Mr. Waffler perked up when Ms. Justice-Smith paused. “Good.  We can deny the application now, right?” he asked.

“No,” responded Ms. Justice-Smith as she opened to the right Civil Code section.  “That was just the background, there are some changes and additions to the laws that apply to the ARC that we need to make sure this Committee takes into account.”

Mr. Waffler sighed.

Recent Changes in the California Code that Impact Architectural Review Committees

In the last two years, there have been five legislative changes that directly impact Architectural Review Committees.  Those changes are:

1)      Effective July 1, 2006, architectural committees are required to keep meeting minutes.  (Civil Code section 1365.2(a)(1)(H).)  These minutes must be made available to members, upon request.  (Civil Code section 1365.2(b)(1).)  The association may withhold or redact information because of privacy, privilege under law, or if the information may lead to fraud in connection with the association.  (Civil Code section 1365.2(d).)

2)      Architectural committee decisions must be in writing. (Civil Code section 1378(4).)

3)      If the proposed change is disapproved, the notice of the decision sent to the homeowner must include an explanation of why the proposed change was not approved and provide a description of the procedure for reconsideration of the decision by the board. (Civil Code section 1378(a)(4).)

4)      If an application is denied, associations are required to have a procedure in place to allow homeowners to appeal the architectural committee’s decision to the board. (Civil Code section 1378(a)(4).)

5)      Associations are required to annually mail a notice to all homeowners describing the association’s application process.  The notice must describe the common changes that require association approval and include a copy of the procedure used to review and approve or deny a proposed change. (Civil Code section 1378(c).)

Conclusion

After Ms. Justice-Smith explained these new rules to the ARC she described the impact of the legislative changes on the ARC and the Utopia Homeowners Association.

“Associations continue to have broad authority to enforce their architectural restrictions.  Through these recent changes the California legislature appears to be increasing the due process rights of homeowners when they submit applications to architectural review committees.  As long as the ARC applies reasonable standards in making architectural decisions, documents the decisions, properly notifies homeowners of the decisions and then follows reasonable enforcement procedures, the ARC will be in compliance with the recent changes to the code.”

“Civil Code section 1378(a)(2) specifically states ‘A decision on a proposed change shall be made in good faith and may not be unreasonable, arbitrary, or capricious.’  Civil Code section 1378(a)(1) also requires the procedure and standards the ARC uses for its review to be written out in the Association’s governing documents.”

“Utopia’s procedures and standards are already included in its Architectural Guidelines.  Now the key, to ensuring Mr. Member’s due process rights are met is for the ARC to send him a letter detailing the ARC’s review procedures, why the application was denied and explaining the Association’s appeal process.”

“Here, the ARC appears to be leaning toward approving the masonry wall, but denying the wrought iron gate.  In its response, the ARC must explain why the wrought iron gate is not approved and explain the procedures for the Board to reconsider the ARC’s decision.”

Mr. Reasoner so moved, Mr. Waffler seconded and the motion passed unanimously.  Mr. Reasoner added the decision to his minutes log with a note regarding why the wrought iron fence was denied.  He then sent a copy to the property manager, who sent the notice to Mr. Member.

Mr. Member received the notice and marked his calendar.  He planned to attend the Association’s next Board meeting to take advantage of Utopia’s appeal process.