Month: September 2017

Standing to Sue While Sitting on the Board

Standing is a party’s right to make a legal claim in Court. When the judge comes out to sit on the bench, she will read the cases and the parties or their attorneys come forward as called. “Standing” is the right to seek a legal remedy as shown by the facts alleged. Judges ordinarily decide questions of standing without ruling on the merits of the case. That said, a party dismissed for lack of standing cannot win. Standing just means that the case can proceed.

“Standing” has been in the news lately. There was a federal court complaint filed a monkey, Naruto, who in 2011 took a selfie with a camera and later sued David Slater, the owner of the camera for copyright infringement. The monkey and photographer litigated over whether the nonhuman primate has standing to sue under the U.S. Copyright Act. The notoriety of the suit increased the popularity of the photograph, raising the stakes in the case. The case settled this month, so we may never know whether a monkey can have standing. (I am doubtful because monkeys do not have upright posture. They walk on their feet and the knuckles of their hands and do not “stand” like we do.) In most cases, the question of standing is not controversial. If someone is party to a contract, they ordinarily have standing to sue under that contract. If someone runs into my mailbox with their car, I have standing against them because they damaged my property.

The question is not always so clear. For example, in community associations, the declaration of covenants defines legal relationships among the board and owners. If an owner feels that that their rights have been infringed by the actions of others in their community, who do they have standing to sue? There are numerous possibilities:

1. The HOA as a corporate entity
2. Individual officers or directors
3. An architectural review committee
4. Individual neighbors
5. Local land use officials
6. The developer or declarant

This is relevant to whether the owner actually has a case. Because of filing deadlines, expenses and headaches, owners need to avoid “going ape” on the wrong party. If the HOA is not an issue, then the owner would have to look at another theory such as trespass, nuisance, negligence or other type of right that may exist outside of community associations law. When the dispute involves a right or duty imposed by the governing documents of an HOA or powers of the board, then the answer will be found in interpretation of the covenants and other governing documents. The answer may not be apparent from the four corners of the HOA covenants. Owners have rights, duties and potential remedies that exist under statute or common law that may be implied by, but not specifically referenced in, the association documents.

The Court of Appeals of the District of Columbia considered the doctrine of standing in HOA matters earlier this year. Wilfred Welsh owned a townhouse in Washington, D.C. He was a Director and Secretary of the Chaplin Woods Homeowners Association. Welsh was unhappy because Beverly McNeil and Alvin Elliott rented their townhouse to Oxford House. Oxford House organized a small group home for women recovering from alcoholism and substance abuse. Welsh pointed to the fact that persons living in this townhouse were not party to the Oxford House lease. Welsh contended that the Oxford House lease was not approved by the board. A board majority did not share his views so he filed a lawsuit against McNeil and Elliot in his own name. Welsh did not name Chaplin Woods as a party. Chaplin Woods made no effort to formally intervene in the case.

McNeil and Elliot filed a counterclaim against Welsh, asserting that he violated the Fair Housing Act and the D.C. Human Rights Act by his opposition to their request for an accommodation for their tenants. They said that as Secretary, he delayed and obstructed their request for an accommodation by not transmitting Oxford House’s letter to the HOA’s attorney. Welsh insisted that he had standing to sue McNeil and Elliot because the Bylaws granted individual members the same rights as the Association to enforce the governing documents. After he filed suit, the board formally approved the lease agreement to Oxford House. Welsh argued that McNeil and Elliot could not sue him for Fair Housing because he was just a single board member with no power to exercise the HOA’s corporate powers on his own. So Welsh v. McNeil had two juicy HOA law issues: (1) Can an owner individually enforce governing documents after the board waived the right to enforce? and (2) Can a rogue director or officer be sued individually under housing discrimination laws for obstructing a request for a reasonable accommodation for a disability?

For a few years, Oxford House functioned with leases with the owners that were not approved by the Board. Apparently, the occupants simply lived in the townhouse without board action to approve the leases or kick them out. When pressed on this issue, Oxford House formally requested a reasonable accommodation under fair housing laws. Oxford House sought permission for the women to live in the house, which would facilitate their recovery from substance abuse challenges without having their individual names on lease agreements approved by the board. Oxford House wanted the board to approve a lease in its corporate name. The lawyers for the HOA and Oxford House went back and forth on this.

Before the board decided, Mr. Welsh filed a complaint in his own name against McNeil and Elliot. He wanted the Court force them to stop leasing their property in a manner not contemplated by the bylaws. The rules required the leases to be in the names of the occupants. Welsh’s suit was not sanctioned by the board. After the suit was filed, the board met and decided to approve the disability accommodation request. Welsh apparently attended this meeting but did not vote, citing a conflict of interest caused by his pending suit. The President sent McNeil & Elliot a letter saying that the HOA approved the lease. The board did not subsequently walk back on this approval. This threw a “monkey wrench” of sorts into Welsh’s case. Was Welsh’s claim rendered moot by the board’s formal decision to waive the community’s rights to enforce the bylaw?

Both sides moved to dismiss each other’s claims as lacking standing to sue. The judge agreed with both and dismissed both claims. He found that because the board approved the lease, there no longer was a dispute to be litigated. He observed that Welsh did not sue the HOA so he had no way of disputing the board’s decision without suing them directly.

Welsh did have standing to sue when he filed his complaint. An HOA has the primary responsibility for enforcing its covenants, rules and regulations. However, an individual owner also has standing to enforce the governing documents unless they provide otherwise. If the HOA simply takes no action, then ordinarily an owner may bring his own action. The question in Welsh v. McNeil was what happens to the owner’s cause of action if the board “preempts” it by deciding one way or the other? The Court of Appeals interpreted the Bylaws to mean that once the board acted to approve the lease, an individual like Welsh was thereafter deprived of his claim: “Generally speaking, a homeowner’s association has the power to release or compromise any claim it has the right to assert, and to do so over the objection of individual homeowners, who then are bound by the association’s resolution of the claim.” The D.C. Court of Appeals cited the 1985 decision Frantz v. CBI Fairmac Corp., where the Supreme Court of Virginia observed that where a condominium association has the authority to bring a claim against a violation of a common right, it also has the power to compromise that claim and that the individual unit owners would be bound by that compromise.

The D.C. Court of Appeals observed that it would not make sense to give individual owners the power to “override” decisions of the board of directors when it comes to matters of community interest. The Court was careful to recognize that one must distinguish between matters of community concerns and individual property rights. For example, if one owner rents out their property in a manner that violates the rules or fails to abide by architectural appearance rules, then this is something that an individual owner could not legally enforce once the board took it up. On the other hand, the board has no authority to unilaterally compromise the claim of an individual owner against the board itself or another owner.

If an owner’s interests in a claim for enforcement against another owner is no different than any other owner, then it is probably one of common concern that the board can “foreclose” or “preempt” by pursuing, waiving or settling. On the other hand, if the owner’s own property rights were damaged, infringed or invaded, then it may not be something that the board can take away.

Wilfred Welsh did not contend that he was asserting any right other than the same right the association possessed to enforce against McNeil and Elliot for the common interests of the community. This makes sense because Welsh’s interests were not affected by having fellow residents whose names were not written on any deed or lease any differently than any other townhouse owner.

If Welsh was unhappy with the way that the board decided to compromise the claim for himself and everyone, he would not be completely without options. Welsh could have tried to sue the association directly for breaching their contractual duties to him by deciding the issue about the Oxford House as they did. But he did not.

Welsh argued that the HOA’s decision did not moot his claim because the board did not properly approve the lease. He contended that the board did not actually obtain the requisite number of votes to approve the lease. The Court of Appeals decided that whether they did or not, the President sent a letter to McNeil and Elliot did, and the board never retracted that letter. McNeil and Elliot had a right to rely upon the President’s letter.

Many people are attracted to involving themselves in HOA boards and committees because they believe enforcement of the rules will prevent the “wrong” types of people from moving into their community. Many may fear recovering alcoholics or drug addicts living on their street. For many people HOAs seem to carry an aura of exclusivity that they find very attractive. I don’t like these attitudes – what if my neighbors were to decide that they consider me to not be the kind of person they want living near them?  HOAs tend to weaken individual property rights and strengthen the notion that someone else can do a better job of deciding how an owner should use their own property. I also believe that societal problems like substance abuse are too complex to be solved by NIMBY initiatives.

This case would have unfolded very differently if a majority on the board agreed with Welsh. That is certainly not unheard of. Housing discrimination cases against HOAs and condo boards are common. The board could have denied the accommodation request outright, attempted to enforce the leasing rules, or allowed Welsh to proceed on his own without ruling one way or the other.

Some of my readers may be wondering how it can be fair for the board to take away rights provided to owners by the governing documents by waiving or settling the violation. Bear in mind that an average homeowner in a HOA does not want every other member of the association to have the authority to sue for alleged violation of the governing documents. It is in the interest of owners to narrow the number of parties who can assert legal claims against them.

The other issue raised in this case is whether a director or officer, acting on his own without the support of a majority of the board can engage in conduct opening himself up to liability under housing discrimination laws. The residents of Oxford House could be found to be disabled persons entitled to accommodation because they seek treatment for drug and alcohol abuse. The D.C. Superior Court ruled that Welsh could not suffer personal liability because as a single board member he could not bind the association. The question was rendered moot because the board ultimately approved the Oxford House lease. However, Welsh did not argue that it was moot because he contended that the approval of the lease was not valid and binding. The Court of Appeals reversed, finding that the fair housing claims against Welsh could proceed. While Welsh had no power to ultimately decide the accommodation requests on his own, as corporate secretary he had an ability to delay board decisions by holding onto written requests and not forwarding them on to the board’s attorney or other representatives. McNeil and Elliot alleged that Welsh substantially contributed to delays to approval of the accommodation. The Court of Appeals observed that delays like this, which go on for considerable lengths of time with no apparent end in sight have the effect of an outright denial. While McNeil and Elliot may not ultimately prevail on their fair housing claim against Welsh, the Court of Appeals ruled that it may proceed through the courts.

In any dispute involving property associations, an owner who has suffered damage or invasion of property rights must carefully consider the party against whom she may have a legal claim. She must also consider whether the association or other owners also have a claim, and whether the association can compromise or waive such claims for everyone. For many owners, it may not make sense to pursue claims against neighbors for the kinds of claims that the board can come along and make moot by a decision at a meeting. Claims like technical violations of architectural conformity standards may not make sense to bring because the commitment required to pursue such legal action might not result in any money or rights upon the claimant. Understanding the difference between “private” claims between owners and “common” claims is important to bringing or defending any case among individual owners in a community association. Qualified legal counsel can help to sort through and interpret the governing documents to provide critical insight into the nature of a claim by an owner, neighbor or association.

Case Citations:

Welsh v. McNeil, 162 A.3d 135 (D.C. 2017)

Frantz v. CBI Fairmac Corp., 331 229 Va. 444 (1985).

photo credit: A. Nothstine LeDroit Park Rowhouses via photopin (license) (Does not depict any property described in article, to my knowledge)