Discretionary Authority of Community Association's Governing Body
In Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, a condominium homeowner sued her homeowners association when the association decided to not fumigate a termite infestation in the building that contained the plaintiff's unit but rather to "spot treat" it. She contended the decision caused a diminution in the value of her unit. (Id. at pp. 252-253.)
The issue before the Supreme Court was the standard to be used by the court in evaluating "discretionary economic decisions made by the governing boards of community associations." (Lamden, supra, 21 Cal.4th at p. 264.)
The Lamden court held that "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."
In Lamden, the court held that neither Civil Code section 1364 nor the CC&Rs could reasonably be construed to require any particular method of termite treatment or require that the association keep the development termite free. The court said its decision "affords homeowners, community associations, courts and advocates a clear standard for judicial review of discretionary economic decisions by community association boards, mandating a degree of deference to the latter's business judgments sufficient to discourage meritless litigation, yet at the same time without either eviscerating the long- established duty to guard against unreasonable risks to residents' personal safety owed by associations that 'function as a landlord in maintaining the common areas' or modifying the enforceability of a common interest development's CC&Rs ." (Id. at p. 270.)
The court went on to say that "common sense suggests that judicial deference in such cases as this is appropriate, in view of the relative competence, over that of courts, possessed by owners and directors of common interest developments to make the detailed and peculiar economic decisions necessary in the maintenance of those developments. A deferential standard will, by minimizing the likelihood of unproductive litigation over their governing associations' discretionary economic decisions, foster stability, certainty and predictability in the governance and management of common interest developments. Beneficial corollaries include enhancement of the incentives for essential voluntary owner participation in common interest development governance and conservation of scarce judicial resources." (Id. at pp. 270-271.)
In Lamden, the court held that in deciding to use spot treatments rather than fumigation to address the termite problem, the homeowners association's board exercised discretion that was within the scope of the authority given to it by the CC&Rs and governing statutes. The court noted that the trial court found the board reasonably investigated and acted in good faith "and in a manner the Board believed was in the best interests of the Association and its members." (Lamden, supra, 21 Cal.4th at p. 265.)