Understanding deference to HOA boards and overturning bad precedents

A recent California case, Affan v. Portofino Cove HOA, highlights several important aspects of legal precedent and the judicial deference doctrine that all advocates must understand. First, in California, as applied to maintenance decisions only, the court in Lamden v. La Jolla made a reasonable clarification of the business judgment rule and established the “judicial deference” doctrine.

This court ruled:

It is important to note the narrow scope of the Lamden rule. It is a rule of deference to the reasoned decisionmaking of homeowners association boards concerning ordinary maintenance. It does not create a blanket immunity for all the decisions and actions of a homeowners association. The Supreme Court’s precise articulation of the rule makes clear that the rule of deference applies only when a homeowner sues an association over a maintenance decision that meets the enumerated criteria.

The Lamden opinion made clear, however, that the rule applies only in limited circumstances. The court described those specific circumstances as follows: “Where a duly constituted community association board, upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members, exercises discretion within the scope of its authority under relevant statutes, covenants and restrictions to select among means for discharging an obligation to maintain and repair a development’s common areas, courts should defer to the board’s authority and presumed expertise.”

You must understand the ruling, the courts reasoning, and the criteria that make for a valid defense by the HOA, such as, “duly constituted board”, “reasonable investigation”, “in good faith and in the best interests of the community”, “exercises its discretion . . . within . . . its authority”. And the Court added, “The judicial deference doctrine does not shield an association from liability for ignoring problems; instead, it protects the Association’s good faith decisions to maintain and repair common areas.” (emphasis added).

The court in Affan also removed the managers from protection under this defense since they are not an HOA.

Second, the Affan court clearly found fault with the trial court’s conclusion made without substantial evidence, like a dicta (opinions by authority without any foundation being supplied, as found in too many decisions favoring HOAs). “The trial court never decided, based on the evidence . . . . Instead, the court simply concluded as a matter of law, ‘based upon Lamden,’ that defendants were not liable for negligence . . . “ The court overruled the trial court and required a decision based on evidence.

Third, the Affan court illustrates out how the Lamden court overruled the business judgment rule and established the ‘judicial deference” rule, rejecting precedent in the name of justice and fairness. Unjust and unfair precedents favoring the HOA can be and must be overturned!