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A Deal Is A Deal

There are Consequences When a Member Fails to Correct a Violation After a Settlement Agreement

Published: Jan 2017

Enforcing an association's governing documents can be complicated, even when the violation at issue is not. Architectural violations probably exist in every community. When such violations cannot be resolved informally, alternative dispute resolution and/or litigation may ensue. In an action to enforce an association's governing documents, the prevailing party will be entitled to recover its reasonable attorney's fees and costs. (Civil Code Section 5975.)

In the recent appellate opinion of Rancho Mirage Country Club Homeowners Association v. Hazelbaker, we learn that the court is concerned with ultimate compliance when determining the prevailing party. In other words, so long as an owner ultimately modifies his/her property to the satisfaction of the board, the association will be deemed to have prevailed in its efforts to cure an architectural violation and will be entitled to recover its attorney's fees and costs.

In the Rancho Mirage case, the defendant homeowners made exterior patio improvements that the plaintiff association alleged were in violation of its governing documents. Pursuant to Civil Code Section 5930, the parties participated in mediation as a prerequisite to litigation. At the mediation, the homeowners agreed to make changes to the patio that would be acceptable to the association within sixty days of execution of the settlement agreement. The settlement agreement also included a prevailing party attorney fees clause with respect to any subsequent legal action pertaining to the enforcement of or arising out of the settlement agreement.

The homeowners failed to complete the modifications prescribed by the settlement agreement within sixty days. The association responded by filing a lawsuit to enforce the homeowners' performance under the settlement agreement. After the lawsuit was filed, the homeowners agreed to make patio modifications that were different than the ones described in the settlement agreement, but still acceptable to the board. Upon completion of those modifications, the association filed a motion to recover its attorney's fees and costs.

The trial court determined that the association was the prevailing party because it successfully obtained the owners' compliance, even though the final patio modifications were different than the ones agreed to at mediation. The appellate court agreed.

Rancho Mirage correctly held that the determination of prevailing party in an architectural enforcement case hinges on whether the association obtains its primary objective of bringing the property into compliance with the governing documents. The board members in the Rancho Mirage case communicated their expectations to the homeowners and were flexible as to what exterior work would satisfy architectural standards. Consequently, the court viewed the board members' efforts as successful because the homeowner ultimately completed the patio to the satisfaction of the board.

The lesson learned for board members in an architectural violation dispute is to gain compliance through communication and compromise. This can be achieved by providing homeowners examples of what does and does not comply under the association's architectural standards or simply providing a variety of options that comply with the architectural standards. Following these tips will hopefully prevent litigation, but should litigation ensue, the association will at least be well-positioned for a prevailing party determination under the holding in Rancho Mirage.

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