The California Court of Appeal recently came down with a decision in the case of Ritter & Ritter Inc. v. The Churchill Condominium Association dealing with (among other things) the responsibilities and duty of care of a condominium association and its directors. We will address other issues relating to this case in a future article.
In this case, the homeowner requested that the association seal a hole in the slab which had been made as part of the original construction for pipes to pass-through from one unit to the other. There was no question that the hole should be filled in, as it constituted a fire danger. Somehow, the board incorrectly concluded that this hole was the homeowner’s responsibility to deal with, and the homeowner disagreed and sued the Association. The work would have cost the association approximately $2,500 (for that unit); instead, the case cost the Association hundreds of thousands of dollars for attorneys’ fees and costs. The Court of Appeals decision (click here) provides an excellent discussion on a homeowner’s versus the condominium association’s repair responsibilities and the director’s duty of care as well. The Court’s discussion on this issue follows:
DISCUSSION
General Principles Relating to Condominium Associations
To provide context for the following discussion, we begin with some basic legal principles. First among these is an understanding of the general nature of a non-profit homeowners association; next is the nature of the liability of such an association and its directors.
Under California law, a “condominium project” is a form of common interest development. A “condominium” is “an undivided interest in common in a portion of real property coupled with a separate interest in space called a unit . . . .” (§1351, subd. (f).) Unless the governing documents provide otherwise, the common area of a condominium project is owned by the owners of the separate interests as tenants in common. In addition to the combined ownership of the two estates enumerated above, the major characteristics of a condominium include an agreement among the unit owners regulating the administration and maintenance of the property. The agreement is reflected in the governing documents of the association; which includes the declaration and any other documents, such as bylaws, operating rules of the association, and articles of incorporation which govern the operation of the common interest development. (§1351, subd. (j).)
The development’s restrictions should be contained in its recorded declaration, but may also be contained in an association’s internal rules or bylaws. (§§ 1353, 1354.) The CC&R’s bind all owners of separate interests in the development.
After its creation, a common interest development is managed by an association [aka homeowner’s association.] (Civ. Code § 1363.) Associations are responsible for the maintenance of the development’s common areas. An association can be unincorporated or incorporated. (Civ. Code § 1363, subd. (a).) Most associations are incorporated under the Nonprofit Mutual Benefit Corporation Law. (Corp. Code §§ 7110-8910.) Unless the governing documents provide otherwise, an incorporated or unincorporated association may exercise the powers granted to a nonprofit mutual benefit corporation. (Civ. Code § 1363, subd. (c).) The association is governed by a board of directors and the powers of the directors are enumerated in the development’s governing documents. State and federal statutes as well as common law impose obligations on the directors.
The Association’s Duty of Care
The existence of a duty “is not an immutable fact, but rather an expression of policy considerations leading to the legal conclusion that a plaintiff is entitled to a defendant’s protection.” (Ludwig v. City of San Diego (1998) 65 Cal.App.4th 1105, 1110.) Courts have repeatedly declared the existence of a duty by landowners to maintain property in their possession and control in a reasonably safe condition. (Rowland v. Christian (1968) 69 Cal.2d 108,119; Vasquez v. Residential Investments, Inc. (2004) 118 Cal.App.4th 269.) The duty is described as follows: “a landlord must act toward his tenant as a reasonable person under all of the circumstances, including the likelihood of injury, the probable seriousness of such injury, the burden of reducing or avoiding the risk, and his degree of control over the risk-creating seriousness of such injury, the burden of reducing or avoiding the risk, and his degree of control over the risk-creating defect,” (Brennan v. Cockrell Investments, Inc. (1973) 35 Cal.App.3d 796, 800-801; Golden v. Conway (1976) 55 Cal.App.3d 948, 955.)
In addition to this potential basis for liability, a homeowners association is also potentially liable for any violation of statute, administrative code regulation, or building code provision relating to the condition of the property. In such situations, failure to comply with the statutory standard may give rise to a presumption of negligence on his part. (Gallup v. Sparks-Mundo Engineering Co. (1954) 43 Cal.2d 1, 9; Tossman v. Newman (1951) 37 Cal.2d 522, 525; Williams v. Lambert (1962) 201 Cal.App.2d 115, 119; Alarid v. Vanier (1958) 50 Cal.2d 617, 621.) Such presumption of negligence may arise whether the law violated is a state statute, a safety order, an administrative regulation, or a local building code provision.
Traditional tort principles impose on landlords, including homeowner associations, that function as a landlord in maintaining the common areas of a large condominium complex, a duty to exercise due care for the residents’ safety in those areas under their control. (See, e.g., Kwaitkowski v. Superior Trading Co. (1981) 123 Cal.App.3d 324, 328; O’Hara v. Western Seven Trees Corp. (1977) 75 Cal.App.3d 798, 802-803; Kline v. 1500 Massachusetts Avenue Apartment Corp. (D.C. Cir.1970) 439 F.2d 477, 480-481; Scott v. Watson (1976) 359 A.2d 548, 552; Sevigny v. Dibble Hollow Condominium Assn., Inc. (2003) 76 Conn.App. 306.) California cases hold that a homeowners association is liable to a member who suffers injury or damages as a result of alleged negligence of the association in failing to maintain a common area adequately.
In the leading case of White v. Cox (1971) 17 Cal.App.3d 824, the court of appeal held that a condominium owner could sue the unincorporated association for negligently maintaining a sprinkler in a common area of the complex. In so holding, the court recognized that the plaintiff, a member of the unincorporated association, had no “effective control over the operation of the common areas . . . for in fact he had no more control over operations than he would have had as a stockholder in a corporation which owned and operated the project.” (Id. at p. 830.) Since the condominium association was a management body over which the individual owner had no effective control, the court held that the association could be sued for negligence by an individual member.
An assessment of the individual arrangements for each condominium association would be required in order to asses the issue of liability. The Supreme Court concluded “that a condominium possesses sufficient aspects of an unincorporated association to make it liable in tort to its members.” (Ibid.) The White case was reaffirmed and cited with approval by the Supreme Court in Frances T. v. Village Green Owners Assn. (1986) 42 Cal 3d 490.) There may be other possible theories for liability in addition to the association’s negligence. One possibility is the association’s fraudulent misrepresentation with regard to the safety of its common areas. Another possibility is breach of contract when the plaintiff was a member of the association and the association failed to comply with maintenance of safety provision in the development’s declaration or bylaws. (See e.g., Murphy v. Yacht Cove Homeowners Ass’n (S.C. 1986) 345 S.E.2d 709.)
The Individual Director’s Duty of Care
A corporate officer or director, like any other person, owes a duty to refrain from injuring others. (Frances T. v. Village Green Owners Assn., supra, 42 Cal.3d at p. 505; PMC, Inc. v. Kadisha (2000) 78 Cal.App.4th 1368, 1381.)
Consequently, directors are jointly liable with the corporation and may be joined as defendants if they personally directed or participated in the tortious conduct. (United States Liab. Ins. Co. v. Haidinger-Hayes, Inc. (1970) 1 Cal.3d 586, 595; Dwyer v. Lanan & Snow Lbr. Co., (1956) 141 Cal.App.2d 838, 841.) However, California has adopted the rule that while a condominium association may be liable for its negligence, a greater degree of fault is necessary to hold unpaid individual condominium board members liable for their actions on behalf of condominium associations.