Inconsistent, or selective, enforcement of covenants, restrictions and rules & regulations by a Community Association is, unfortunately, a frequent occurrence. Community leaders must understand that inconsistent enforcement by an Association for even a minor issue can lead to major liability for an Association.  This article will explore some of the issues surrounding inconsistent enforcement and will discuss ways to avoid potential liability for inconsistent enforcement.

Enforcement of Covenants, Restrictions and Rules & Regulations

In any type of common interest community, whether it is a planned community, cooperative or condominium, the Board (Board of Directors, Executive Board or Council) is charged with the responsibility to enforce the community’s covenants, restrictions and rules & regulations for the benefit of every member/owner in the community.   This responsibility is not voluntary; rather, the Board has a duty to (1) ensure that the covenants, restrictions and rules & regulations of the community are adhered to/followed by the members/owners; and (2) enforce the covenants, restrictions and rules & regulations against a member/owner who fails to adhere/follow them.   Examples of frequently encountered enforcement issues include but are not limited to pools, trash, outdoor elements (architectural control), parking, pets/animals, curtains, outdoor storage, maintenance and playgrounds.

How Does Inconsistent Enforcement Occur?

Inconsistent enforcement can occur in a number of different ways.  Frequent causes of inconsistent enforcement will be discussed below, though the list is certainly not exhaustive.

1.         Failing to enforce covenants, restrictions and rules & regulations.

When an Association fails to enforce its own covenants, restrictions and rules and regulations, this is, of course, inconsistent enforcement.   Associations must follow the provisions set forth in the governing documents uniformly and consistently, all the time.   When Boards fail to enforce an Association’s covenants, restrictions and rules and regulations properly, enforcement may become a feckless exercise.    In other words, when a Board does not enforce its governing documents uniformly, all of the time, this can weaken and/or kill an enforcement action and prevent an Association from being able to enforce its own governing documents.  This could wreak havoc for the governance of an Association. 

2.         Playing favorites.

A Board cannot choose to enforce its covenants, restrictions and rules and regulations against Mrs. Jones but not against Mr. Smith, even if Mrs. Jones is the community pariah and Mrs. Smith is the nicest, most charitable person in the community.   In order to comply with its fiduciary duty to the Association and its members, a Board mustenforce the covenants, restrictions and rules and regulations equally and must not play favorites. Picking and choosing some but not all members as it relates to enforcement action(s) is a sure-fire path to a lawsuit being filed against an Association.

3.         Stupid decisions.

Let’s not sugarcoat it.   Community leaders make stupid decisions.   Sometimes these stupid decisions lead to inconsistent enforcement of the community’s covenants, restrictions and rules & regulations.  The key is recognizing, and reversing course, on a stupid decision before it becomes a problem for the association.  

If the stupid decision was made in good faith (meaning, it may have been the wrong decision, but it wasn’t made for an improper purpose), then an Association will likely have a valid defense to a lawsuit alleging harm from inconsistent enforcement.  Stupid decisions can be avoided by adopting and implementing an enforcement policy which will be applied uniformly and equally to all owners.  

4.         Lack of due process.

In the author’s home state of Pennsylvania, both the Pennsylvania Uniform Condominium Act (§ 3302(a)(11)) and the Pennsylvania Uniform Planned Community Act (§ 5302(a)(11)) provide an Association with the power to levy reasonable fines for violations of the declaration, bylaws and rules and regulations of the association – after notice and an opportunity to be heardis provided to the owner.  Many other jurisdictions have similar requirements.   Fining an owner and/or engaging in a related enforcement action prior to and/or without providing an owner with notice and an opportunity to be heard may lead to a successful lack of due process defense by the allegedly offending/violating owner.   

It is further noted that many, if not the majority, of the governing documents reviewed by the author in his many years of Association representation have the due process provision reversed, meaning that the documents provide for the fine and/or violation notice to be sent first, and then allow an owner to appeal the fine or violation.   This runs contrary to the intent of the Uniform Acts and the very concept of due process itself.   Boards should carefully consider updating and amending governing documents to ensure that due process provisions are in accord with the law.

5.         Unofficial enforcement.

Over the years, the author has unfortunately dealt with instances where “unofficial” enforcement occurs.   Unofficial enforcement involves situations where a Board member, committee member or some other person with actual or apparent authority to act on behalf of the Association tells a member to do something as it relates to the covenants, restrictions and rules & regulations, but without the consent of the [entire] Board of Directors.   

For example, an Architectural Review Committee (ARC) member unilaterally decides to verbally advise a unit owner to remove his deck because the ARC member believes the deck to be in violation of the covenants.   This is unofficial enforcement because the ARC member may be viewed to have authority to tell the unit owner to remove his deck although the ARC member, in actuality, had no authority to do so.  Such behavior actually leads to the opposite situation, i.e., no possible enforcement of the unauthorized, unofficial enforcement action. Boards must therefore be cognizant of the propensity for this type of activity to occur and must properly educate and train all community leaders and volunteers to avoid unofficial enforcement from occurring.  

6.         Drafting Rules and Regulations that are contradictory, or contrary, to the covenants and restrictions.

Rules and Regulations cannot go “beyond” the scope of the covenants and restrictions – meaning, a Board can’t adopt a rule or regulation that is more restrictive than the recorded covenants and restrictions.   Moreover, even if they comply with these governing documents, Rules and Regulations must be “reasonable”, meaning, a court would need to view the Rule or Regulation as reasonably related to the purpose for which it was adopted.   

Potential Liability for Inconsistent Enforcement

Inconsistent enforcement may result in a lawsuit being filed against the Association and/or its Board. An Association Board must therefore act properly, uniformly and consistently when enforcing the community’s covenants, restrictions and rules and regulations.  But what standard is applied to determine if a Board acted properly, uniformly and consistently when enforcing a community’s covenants, restrictions and rules and regulations?  

In Pennsylvania, and similarly in many other jurisdictions,the Business Judgment Ruleprovides that Board Members must make decisions (1) within the scope of their given authority; (2)ingood faith;(3) using ordinary care; and(4) in the best interest of the Association (i.e., not in the best interest of the Board Members).  Therefore, under the Business Judgment Rule, in order to establish a cause of action for breach of fiduciary duty against an Association for an inconsistent enforcement action taken by its Board, the party complaining must allege facts which would establish that the actions of the Board were unauthorized, or that the actions had been taken fraudulently, in bad faith, or constituted self-dealing. Lyman v. Boonin, 635 A.2d 1029 (Pa. 1993). 

Courts will typically not substitute their judgment for that of the directors of a corporation and will not interfere with the internal management of the corporation unless the acts complained of constitute fraud, bad faith or gross mismanagement, or are unlawful.  Kelso Woods v. Swanson, 692 A.2d 1132 (Pa. Cmwlth. 1997), Mulrine v. Pocono Highland Community Association, 616 A.2d 188 (Pa. Cmwlth. 1992).  Moreover, in the Pennsylvania case of McMahon v. Pleasant Valley West Association, 952 A.2d 731 (Pa. Cmwlth. 2008), the Commonwealth Court of Pennsylvania found that a homeowners association has a duty to “act reasonably in the exercise of its discretionary powers, including rulemaking, enforcement and design-control powers” and to “use ordinary care and prudence in managing the property… subject to its control.”  Id. at 735. 

Given the body of law that is evolving nationally as it relates to the standard to be applied to determine if a Board acted properly, uniformly and consistently as it relates to enforcing a community’s covenants, restrictions and rules and regulations, the author predicts the future trend will be for courts to combine the attributes of “reasonableness” and the Business Judgment Rule, meaning, a Board must act reasonably with respect to its “discretionary” powers, including the enforcement of covenants, restrictions and rules and regulations.  

If a Board therefore acts reasonably in enforcing its covenants, restrictions and rules and regulations, it will greatly lessen the likelihood of inconsistent enforcement from occurring and potential liability for such action.

Finally, the author notes that every Association should obtain adequate Director and Officer (D&O) Liability Insurance to best protect and defend the Association and its Board (and committee) members from covered claims which may include inconsistent enforcement.

Inconsistent Enforcement is Avoidable

Community leaders rejoice!  The good news is that inconsistent enforcement is entirely avoidable. Boards must proactively seek to reasonably enforce the community’s covenants, restrictions and rules & regulations uniformly and consistently.   How can a Board do this?   Best practices.   

Best practices the Board should incorporate include:

• Following the procedures set forth in the governing documents; 
• Ensuring due process is provided to owners;
• Acting uniformly as to all owners; 
• Adopting/repealing/amending Rules as necessary to clarify;
• Acting within the scope of the Board’s given authority;
• Acting in good faith;
• Using ordinary care; 
• Acting in the best interest of the Association; 
• Acting reasonably with respect to enforcement of rules and regulations; and
• Contacting counsel beforeacting if there is a question.

Finally, the Board can pass a Resolution and, with the assistance of counsel, can adopt an enforcement policy that would be applied uniformly and consistently regardless of the owner or the issue that is involved (of course, such a policy can incorporate some flexibility for a Board to “reasonably” make exceptions to the policy for warranted circumstances).  The enforcement policy must be followed so there is no dispute as to what must be done as it relates to enforcement.  Owners must be provided with a copy of the policy.

In Summary           

Association leaders need to be cognizant of the issue of inconsistent enforcement and must proactively and properly enforce the community’s covenants, restrictions and rules and regulations.   Doing it correctly now will serve to avoid problems later and will greatly reduce, and perhaps eliminate, the potential for liability.  Finally, if there are any questions, concerns or doubts about any type of enforcement issue, the Association should elicit the cogent advice of counsel before undertaking any type of enforcement action.

Edward Hoffman, Jr., Esq.

An abbreviated version of this article was originally published in the September/October 2017 issue of CAI’s Common Ground magazine.