A number of years ago, this Chapter’s Attorneys Committee adopted a policy statement which provided that a Board should refrain becoming embroiled in inter-Owner disputes - particularly over such things as noise complaint where no other adjoining Owner has a similar complaint.  This position had to recently be tempered in light of a Federal District Court decision out of Washington DC where the Court held that a Board’s failure to act when the conflict involved racially and sexual discriminatory conduct could expose the Association to liability under the Civil Rights Act for permitting a “hostile housing environment”.  Reeves v. Carrollsburg Condominium Unit Owners Association, Civ. Action No. 96-2495, 12/18/97.  Thus, the policy can now be stated that so long as protected issues such as race, color, creed, national origin, age or sex are not involved, an Association can refrain from allowing one Owner to use the Board in their personal dispute with their neighbor.

            A common retort to this policy is that the documents contain some provision prohibiting the complained of conduct.  More often than not it is the “no noxious activity clause” or the “no conduct which interferes with another Owners peaceful enjoyment” provision.  The complaining owner then notes that the Documents provide that its restrictions shall be enforced by the Association for the benefit of the Owners.  Thus, the complaining Owner would argue, the Board has a fiduciary duty to enforce the restriction.

            Fortunately, thanks to an excellent presentation on this subject by Attorneys Swedelson and Gottlieb at the last CAI Conference, we now have some precedent to cite to support the commonly held belief that it lies within the Board’s discretion whether or not to expend Association funds to deal with such a dispute.

            First, it must be remembered that the Board’s fiduciary duty is to the Association as a whole, not an individual member.  Cigal v. Leader Development Corp., 408 Mass. 212 (1990).  In judging whether a Board has met this duty a Court must use the business judgment rule which holds that a Court will not second given a Board’s decision so long as it was made in good faith in the belief that the Association’s best interests would be thereby served.  Levanduskey v. One Fifth Avenue Apartment Corp., 553 N.E.2d 1317 (N.Y. 1990).

In Beehan v. Lido Isle Community Corp., 137 Cal. Rptr. 528 (4^th Dist.App.Ct. 1977) the Court applied just this reasoning in dismissing a suit by an owner seeking reimbursement for the attorneys they incurred in enforcing a restriction against another owner.  In Beehan the dispute involved set back restriction contained in a homeowner association’s documents.  The Beehan’s claimed that their neighbor was violating a set back restriction in building a house.  The Board was not sure if, in fact, the Beehan’s were correct as there was uncertainty about the validity of an amendment upon which the Beehan’s were relying.  In reaching its conclusion the Court reasoned that it was appropriate for the Board to refuse to expend significant Association funds on a dubious claim, particularly where those funds were budgeted for operation of the property and not legal fees.  Repeating the business judgment rule the Court noted that it was the Board’s duty to weigh the advantages of a success in the action versus the cost in time, money and the disruption of the Association’s affairs.  So balanced, a Board could properly refuse to litigate a restriction violation which would benefit just one owner.

Having said this, it is not intended to convey a message that Boards are free to ignore violations.  The restrictions and rules exist to ensure the peaceful and proper use and enjoyment of the property by its residents.  Boards must be even handed and reasoned in their decisions whether to become involved in violations.  But clearly, under the foregoing reasoning, the policy adopted by CAI-NE’s Attorneys Committee some ten years ago still holds sway.  A Board is clearly justified in not becoming involved in what it perceives are purely private disputes between neighbors.