Don’t Ignore the Lessons of Telford v. Sagewood Homeowners Association
This week’s tip offers a reminder that being on an HOA board imposes on you a fiduciary duty to make tough decisions and not favor your friends. If you breach those duties, your HOA could pay dearly.
A California HOA board got a reminder of those HOA facts of life in November 2010, when a California appellate court held in Telford v. Sagewood Homeowners Association that it may have failed in its duties to approve and supervise an owner’s construction project, which didn’t meet the board’s original guidelines, took longer than promised, and didn’t conform to the owner’s promised plan.
Telford is the tale of a condo owner in the Sagewood Homeowners Association. Ted Telford’s neighbor, Daniel Lass, owned two condos next to Telford’s unit and sought approval from the HOA’s board to combine his units. His plans included converting about 1,000 square feet of common area to his exclusive use.
In December 2005, Lass submitted his architectural variance request and preliminary plans to the HOA’s architectural committee. In February 2006, the board granted conditional approval of the project, with final approval requiring several more things to happen, including the creation of a procedure for notifying neighbors of final approval, the beginning date of construction, and interruptions in utility service; a valuation of the common area Lass sought to convert to his use followed by approval of the sale by 67 percent of members in a full membership vote. At a later meeting, Lass committed to a six–month time frame for completion of the work.
None of the conditions was met before construction began, and the board didn’t even verify that they were. The HOA didn’t require a valuation or vote on the common areas; it simply “gifted” them to Lass. The project also took nearly two years to complete.
In May 2007, Telford sued Lass and the HOA. He sued Lass for nuisance, intentional and negligent infliction of emotional distress, and negligence in conducting the construction project. He sued the HOA for negligence, contending it failed to adequately evaluate the project for compliance with the HOA’s governing documents. He claimed the board’s approval of the project was “unreasonable, arbitrary, and in bad faith” resulting from the “close personal relationship” between Lass and one or more board members. He also sued the HOA for breach of its governing documents and its fiduciary duties.
How did the board defend itself? And how did the court rule? Find out in our new article, A Case Study in HOA Board Failure: Telford v. Sagewood HOA.